The market surged over 300 points, and the RMB against the US dollar spot exchange rate rose to a new high in over three years.

Ask AI: How has the easing of the situation in the Middle East triggered a surge in the renminbi exchange rate?

With the easing of the situation in the Middle East, the U.S. dollar fell, driving a sharp rise in the renminbi exchange rate.

On April 8, the spot renminbi-to-U.S. dollar exchange rate during intraday trading rose at most to 6.8243, up more than 350 pips from the previous trading day’s closing price of 6.8597. At 16:30, the day’s quote was 6.8274, up 323 pips from the previous trading day, reaching the highest level since February 15, 2023.

The offshore renminbi-to-U.S. dollar exchange rate, which reflects international investors’ expectations more, also surged. As of the time of writing, its intraday high rose to 6.8215, appreciating by more than 300 pips from the previous trading day.

The U.S. Dollar Index fell sharply on April 8. As of the time of writing, its intraday low dropped to 98.6838, and its decline during the day at one point exceeded 0.9%.

Wang Qing, chief macro analyst at Oriental Jincheng, pointed out that, driven by the easing of the Middle East situation and a decline in safe-haven demand, the Dollar Index fell sharply today, leading to a strong appreciation process across major non-USD currencies, including the renminbi. Overall, in the course of the recent outbreak of geopolitical risk in the Middle East, volatility in the global foreign exchange market has been evident. The renminbi’s trend has been steady with a slight strength; exchange-rate indices such as CFETS, which represent the overall level of the exchange rate of the renminbi against a basket of currencies, have risen steadily to more than a one-year high. Behind this are the stable external trade and economic environment for China at present, sustained high growth in exports, and improvements in domestic consumption and investment growth rates at the start of the year, providing strong support for the renminbi exchange rate.

According to a report by Xinhua News Agency, local time on April 7 evening, U.S. President Donald Trump posted on a social media platform that after speaking with Pakistan, he agreed to pause the bombing and attacks on Iran for two weeks, on the condition that Iran agrees to “fully, immediately and safely” open the Strait of Hormuz.

Looking ahead, Wang Qing believes that, considering that the external trade and economic environment is likely to continue to shift back into a steadier pattern over the coming period, exports are expected to maintain relatively fast growth, and the policy to expand domestic demand will further gain momentum and become effective. Combined with elevated sentiment in the FX market, the renminbi will most likely, amid the Dollar Index’s significant fluctuations, continue a trend that is steady with a slight strength.