Despite the market uncertainties caused by Trump's tariff policy, the RMB exchange rate has shown considerable resilience. As of February 10, the offshore RMB to USD exchange rate stood at 7.3099, significantly recovering from the previous level of 7.37, while the RMB central rate also exceeded expectations, reporting at 7.1707. Since Trump announced tariffs on steel and aluminum, the RMB exchange rate has remained stable, with market focus gradually shifting from the tariffs themselves to the Chinese central bank’s exchange rate policy and trade negotiations.
On the specific day when Trump announced the tariffs would take effect (February 5), the RMB central rate was reported at 7.1693, which surprised the market, indicating the Chinese central bank's stable stance in exchange rate pricing. Afterwards, the central rate remained below 7.17, showing considerable strength compared to most periods in January (ranging from 7.18 to 7.2).
Goldman Sachs analysts indicated that although the RMB exchange rate is affected by trade frictions in the short term, the Chinese central bank has not used RMB devaluation to counter the tariff increases. Goldman Sachs stated that as long as trade talks continue, it is unlikely for the central rate to break the 7.2 barrier in the short term. Overall, the stable performance of the RMB exchange rate has also led the market to exercise caution regarding short-term exchange rate volatility.
Additionally, although Trump has postponed imposing a 25% tariff on Canada and Mexico, China quickly announced a 10% to 15% countermeasure in response to a 10% tariff on its goods by the U.S., reigniting concerns over an escalation in trade tensions. However, the market reaction also suggests that the adjustment in the RMB central rate relies more on the Chinese central bank’s policy than on the tariffs themselves.
The Chief Investment Officer of Standard Chartered Bank stated that the stability of the RMB exchange rate helps limit excessive fluctuations of the USD against the RMB. The gradual recovery of the RMB exchange rate indicates that China does not intend to use devaluation as a response to external pressures. It is expected that if the RMB exchange rate can remain below 7.2, USD to RMB fluctuations will be controlled within the 7.31 to 7.34 range.
Looking ahead, institutions generally believe that the progress of trade negotiations remains a key factor affecting the RMB exchange rate. Positive developments in negotiations will bring more confidence to the market. Moreover, despite Trump’s recent announcement of a 25% tariff on steel and aluminum products, there is still uncertainty regarding his tariff policy for other countries, which will continue to be a focus for the market.
In summary, although tariff policies have introduced some uncertainties, the stability of the RMB exchange rate and the Chinese central bank's measures have gradually stabilized market sentiment, suggesting that the RMB exchange rate is likely to remain relatively stable in the coming months without significant fluctuations.
