RMB Central Parity Appreciation Accelerates, Rising 477 Basis Points in September

Xinhua Finance, Beijing, September 30 — The RMB central parity rate against the US dollar was raised by 60 points to 6.7351 on the 30th, the strongest level since February 2, 2023, gaining 477 basis points in September. As of press time, the onshore and offshore RMB held above the 6.71 mark against the dollar.

On the 29th, supported by safe-haven sentiment and the interest rate differential, the dollar index approached a 52-week high but retreated after Federal Reserve official Williams suggested no rush to act; the RMB exchange rate against the dollar rebounded for two consecutive trading days, with the onshore RMB rising to a high of 6.7030 and the offshore RMB trading broadly in the 6.7129-6.7037 range.

On the 29th, the People's Bank of China adjusted and refined several monetary policy tools, including: cutting the interest rate on pledged supplementary lending (PSL) by 0.25 percentage points; expanding the scope of PSL support; increasing the quota for sci-tech innovation and technological transformation relending by 200 billion yuan; and raising the quota for agriculture- and small-business-focused relending by 500 billion yuan.

On the same day, the Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration jointly issued a notice specifying that starting October 1, 2026, an interest subsidy policy for residents' home purchase loans will be implemented, with a tentative implementation period of one year.

Previously, the PBOC's Monetary Policy Committee added at its third-quarter regular meeting the statements of "adhering to the decisive role of the market in exchange rate formation" and "preventing the self-reinforcement of 'herd behavior' and irrational expectations in the market."

CICC FX believes that the direct impact of this policy on the RMB exchange rate is limited. The basic orientation of exchange rate policy has not changed, still respecting market supply and demand and keeping the RMB exchange rate basically stable at a reasonable and balanced level. With the RMB currently on the strong side, what is more noteworthy about the policy is preventing excessively rapid appreciation and the self-reinforcement of one-way expectations, rather than actively changing the exchange rate direction. CICC FX maintains its judgment that the RMB will remain resilient in October, with a slower appreciation slope and increased two-way volatility.

ING analyst Francesco Pesole said that unless Friday's US nonfarm payrolls report comes in far above expectations, the dollar may struggle to sustain its recent strong upward momentum. "While it may be too early to judge the decline in oil prices, news that the US and Iran reached an agreement on the Strait of Hormuz issue may prevent further dollar gains," he said. This may help stabilize government bond markets and risk sentiment. In addition, according to ING's short-term valuation model, the dollar currently looks overvalued.

CITIC Securities chief economist Ming Ming believes that the dollar index may lack sustained upward momentum and will fluctuate overall, while the external environment facing the RMB exchange rate is expected to remain relatively friendly. Factors such as China's highly prosperous exports, the PBOC's flexible adjustment of its exchange rate stabilization policy to temper expectations of a one-way move, and pent-up corporate settlement demand are expected to support a moderate appreciation of the RMB to 6.7-6.8.

(Source: Xinhua Finance)