RMB exchange rate: The correlation between the RMB and the US dollar strengthens

[Market Review] In the previous trading session, the US dollar against the RMB overall showed an upward trend. Onshore RMB closed at 6.8052 against the US dollar at 16:30, down 190 basis points from the previous trading day. The central parity rate of RMB against the US dollar was 6.8415, depreciated by 14 basis points from the previous trading day. The onshore RMB night session closed at 6.8140 against the US dollar. At the New York close, the US dollar index rose 0.39% to 99.27.

[Core Logic] Last Friday, there was a certain tightening trend in global market liquidity. On that day, the yield on the US 30-year Treasury bond hit a 10-month high, while Japanese and European government bonds were sold off, leading to a significant increase in yields across various bonds. Behind this phenomenon, it may indicate liquidity tightening pressures globally amid a backdrop of persistent inflation rebound. However, based on current market indicators, no clear signs of liquidity stress have yet emerged. Whether the pressure from liquidity tightening will persist and whether risk assets will face further pressure will be key areas of focus moving forward. Regarding the RMB, the market rhythm has shifted, with the RMB exchange rate once again fluctuating in tandem with the US dollar index, and the US dollar against the onshore RMB exchange rate returning to the 6.80 level.

[Strategy Recommendations] In the short term, export companies are advised to lock in forward exchange sales in batches at opportune high points near 6.85 to avoid the risk of profit shrinkage due to potential currency depreciation. Import companies, on the other hand, can adopt a rolling foreign exchange purchase strategy near the 6.78 level.

[Key Information]

1) Preliminary results of Sino-US trade talks announced: Mutual tax reductions on a certain range of products, agricultural products among others will benefit! China purchasing US aircraft, with the US ensuring supply of aircraft engines for China!

2) Trump said: If Iran does not act quickly, 'it will end up with nothing.' Reports: The US listed five key conditions in response to Iran's proposal, negotiations are on the brink of collapse. The US and Israel are reportedly considering resuming strikes on Iran as early as next week, including options such as ground seizure of nuclear materials.

3) Selling US Treasuries, buying Japanese bonds, Wall Street prepares for 'Japanese capital repatriation'.

4) Countdown to Samsung strike! South Korean government issues 'final warning': May 18 labor-management resumption talks are the 'last chance'.

Author: Pan Xiang, NanHua Research Institute, Z0021448

Important Disclaimer: The content and opinions in this article are for learning and reference purposes only and do not constitute any investment advice. The market carries risks, and investments should be made with caution.

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