The main reason for the appreciation of RMB is the 50bp interest rate cut by the Federal Reserve. The sharp interest rate cut led to a fall in the US dollar, and the U.S. price followed suit. There is a time difference in interest rate cuts between the United States and China, and RMB appreciation is inevitable during this time difference.
However, it is difficult for RMB to continue to maintain its appreciation trend for several reasons:
1️⃣
China has also started a rate cut/easing cycle, with a momentum no less than that of the US dollar
2️⃣
If RMB continues to appreciate, it will affect exports. In the context of a weak domestic economy, this year's GDP target growth rate is 5%, and Q4 is the time for the sprint. If RMB continues to appreciate, it will be a drag. Then...
3️⃣
The crypto acceleration market is opening, the copycat market broke out in October, and the off-market funds lined up to enter the market. The U price will obviously have a premium against the US dollar. Every round of bull market is the same plot
4️⃣
If there is a recession narrative next year, the US dollar will still be the first safe-haven currency, and the plot of grabbing the US dollar will be staged again
The above are the main reasons why the U price will not continue to fall in the medium and long term. If you are not in a hurry to sell U, you can wait until the market soars/plummets, and the U price obviously has a large premium. It can also relieve your pain.
One more sentence: People who think that the RMB will continue to appreciate will have such a view that the US dollar will continue to depreciate against the RMB due to the US dollar interest rate cut, the US dollar will flow from the United States to China, etc. Lao Yu can only say that China’s current situation is very special. We must comprehensively consider which conditions have higher weight and greater influence.
