RMB Exchange Rate: People’s ⁢Bank ‌of ​China Lowers Central⁢ Parity Rate ⁣Amid Trump’s Return to Power

The People’s Bank of China has made ​a significant move in the foreign‌ exchange market by lowering​ the central parity‌ rate ​of RMB depreciation by 666 basis points.‌ This decision comes as​ Donald Trump has made a comeback ‍as the President of the United States, leading⁤ to ​a strengthening of the ⁣US ​dollar.

• The onshore RMB ⁢exchange rate has ⁢fallen by about 1,000 basis points since Trump’s election became clear.
• The offshore price against the US dollar once dropped⁣ to 7.2.
• RMB per 100 Hong⁣ Kong dollars has risen to the 92.3 level.

The central parity rate of the RMB, released by‍ the ⁤People’s Bank ​of China, was 7.1659 yuan per US dollar, weakening by ⁤666 basis points​ and reaching a⁣ new low since November 2023. This ⁣move reflects⁤ the People’s Bank of China’s tolerance for a weaker yuan in response‌ to market conditions.

Since Trump’s election became clear, the onshore RMB⁣ CNY‍ has weakened by nearly ⁢1,000 basis points to close to⁢ the 7.2 level. The latest ⁣reading was 7.1786, the lowest ‍since⁤ August,‌ down more than 2% from ​the strongest level of⁤ 7.01⁣ at the end of September. The offshore yuan ​CNH once fell below‍ 7.2 and was last at 7.1960.

In terms of exchange rate against⁢ the Hong Kong dollar, the latest exchange rate per 100 Hong⁤ Kong dollars was 92.31‌ yuan. The Hong Kong dollar ⁢has rebounded ‌from the lowest of ⁤90.1 ​at the ‍end of September.

The central parity rate of the ​RMB is regarded as ‍a ‌tool ​for the People’s Bank of China to guide⁤ the atmosphere of ‌the‍ foreign exchange market, limiting the fluctuation of the ⁤RMB exchange rate to a range of 2% above‍ and below the central ‍parity rate.

Analysis: Low ‌Probability of People’s ‌Bank of China Intervention if US Dollar Remains Below 7.3 Level

Trump’s return to power has raised concerns that US‍ inflation will⁤ rise again, hindering the pace of mid-line interest rate cuts. During ⁤his campaign, he repeatedly threatened to impose tariffs on Chinese goods, which ‌also ⁢raised concerns that Beijing will use‌ devaluation to enhance ⁢export competitiveness.

Foreign reports quoted Alvin ​T. Tan, head of ‌Asian foreign exchange‍ strategy at Royal Bank of Canada ​Capital Markets, as saying that‍ the‍ People’s Bank of China is ready to respond to the rise in the US ⁢dollar.

As long as the US dollar does not ‌rise above 7.30 against the yuan, and the US dollar is strong against a wide range of currencies, rather than just ⁣against the unilateral ‌trend⁢ of the⁢ yuan, ​the People’s Bank​ of ‍China will not forcefully‌ resist.