Due to the influence of geopolitical risk premium increases and intertwined macro policy expectations, the RMB exchange rate against the US dollar is under pressure and experiencing fluctuations. On Wednesday, the onshore RMB closed down 123 basis points (bps) at 6.912 per dollar, marking the lowest point since February 10. The latest offshore RMB (CNH) exchange rate was reported at 6.9163, maintaining a spread of about 40 points. The US dollar index (DXY) is currently holding steady near a three-month high. Market analysts state that the continual tension in the Middle East is causing increased pressure on energy prices, which is causing global safe-haven funds to flow back to US dollar assets. At the same time, the rising cost of energy imports is weakening the trade conditions in the Eurozone, leading to investor withdrawal from the euro, further bolstering the dollar's liquidity premium.
Focus on Economic Growth Targets and Expectation Gaps
The sentiment in the domestic foreign exchange market is at a critical juncture. The market's focus is now on the upcoming announcement of China's economic growth target for 2026 at the National People's Congress meeting on Thursday. People close to the regulators suggest that the range set for this target will be the core basis for the market to assess the scope for valuation recovery of Chinese assets. If there is a gap between the set target and the widespread market expectations, it may trigger further expansion in foreign exchange market volatility.
Reduced Risk Appetite Pressures Non-US Currencies
Global stock markets have weakened due to conflict, with non-US currencies generally facing a bottleneck in marginal improvement momentum. It is widely believed by institutions that in the short term, the geopolitical premium will continue to be the core variable dominating the currency path. As risk aversion sentiment continues during the Asian trading session, the RMB exchange rate will see a near-term repricing around the 6.90 mark. Against the backdrop of high external volatility, the market is closely monitoring fundamental data to look for signals of stabilization in capital flows.
