On December 29th, the central parity rate of the Chinese yuan against the US dollar was 7.0331, up 27 basis points from the previous trading day. Recently, there have been fluctuations in the exchange rate of the Chinese yuan, with the offshore Chinese yuan once breaking through the 7.0 mark against the US dollar, attracting market attention. Why is the RMB exchange rate strengthening? What is the future trend? On December 25th, the offshore RMB rose more than 100 points against the US dollar, quickly breaking through the 7.0 mark and briefly touching 6.9980, marking the first time since September 2024 that it has risen above this mark. On that day, the onshore Chinese yuan also maintained the same momentum against the US dollar, once approaching the 7.0 level to 7.0061. In fact, since April 2025, the exchange rate of RMB against the US dollar has continued to strengthen, rising from around 7.35 to around 7.01. Why has the RMB exchange rate strengthened recently? Wen Bin, Chief Economist of China Minsheng Bank, believes that the recent acceleration of RMB appreciation against the US dollar is mainly supported by factors such as the weakening of the US dollar, the resilience of China's exports, and the increasing attractiveness of RMB assets. As the end of the year approaches, the demand for enterprise foreign exchange settlement has entered a seasonal peak, and some believe that the recent appreciation of the RMB is driven by the "settlement wave". Regarding this, Guan Tao, Global Chief Economist of Bank of China Securities, believes that the data shows a month on month decrease in the exchange rate for collection and settlement, as well as the rate for payment and purchase of foreign exchange in November. Behind this phenomenon is that more companies choose to offset their foreign exchange expenses with their own foreign exchange income, avoiding exchange rate risks through natural hedging, rather than blindly settling or purchasing foreign exchange. This also reflects the market's increasing adaptability to two-way fluctuations in exchange rates. Exchange rate fluctuations are directly related to residents' daily lives and business operations. What impact does the strengthening of the RMB exchange rate have on residents? From a positive perspective, after the appreciation of the RMB, cross-border consumption, study abroad, and tourism costs have significantly decreased, and more US dollars can be exchanged for foreign exchange. For example, if you exchange 10000 US dollars for tuition fees, the current exchange rate of RMB is 7.3, which can save about 3000 RMB, and the shopping and accommodation expenses of outbound tourists are correspondingly reduced. However, for residents holding US dollar deposits or US dollar wealth management products, their assets denominated in RMB will experience a shrinkage. ”Wang Qing, Chief Analyst of Oriental Jincheng Macro, said. What changes will the strengthening of the RMB exchange rate bring to business operations? Wang Qing introduced that export enterprises will face direct pressure, which will also lead to a decrease in foreign exchange profits during settlement. On the contrary, manufacturing enterprises that rely on imported raw materials and components benefit significantly, as exchange rate appreciation can directly reduce import costs and improve enterprise profitability. For cross-border investment enterprises, the yield may be discounted due to exchange rate factors. ”The Chief Economist of CITIC Securities clearly stated. What will be the subsequent exchange rate trend? Clearly speaking, the 7.0 level is a key point for the divergence between long and short positions in the exchange rate. After the RMB rose above this level, market consensus expectations have significantly weakened, which has also added uncertainty to the exchange rate trend. Guan Tao believes that the RMB exchange rate is unlikely to show a unilateral trend and is more likely to fluctuate repeatedly around the 7.0 level. So, how should residents and businesses respond? The recently held fourth quarter meeting of the Monetary Policy Committee of the People's Bank of China in 2025 proposed to enhance the resilience of the foreign exchange market, stabilize market expectations, prevent exchange rate overshoot risks, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. Experts say that two-way exchange rate fluctuations are the norm, and residents, businesses, and financial institutions need to be alert to the risk of overshoot. Against the backdrop of the People's Bank of China strengthening expectation guidance and enriching its countercyclical adjustment toolbox, the RMB exchange rate will remain relatively stable at a reasonable and balanced level. Adhering to risk neutrality and doing a good job in risk management are the long-term strategies for dealing with exchange rate fluctuations. (New Society)