At the end of last year, the characteristics of RMB fluctuations were mentioned, with its trends almost entirely following the strength or weakness of exports.
In trading RMB, relying entirely on this idea will not lead to a deviation in rhythm; this is a key characteristic of price fluctuations over the past decade.
The specific impact of Trump’s tariffs is difficult to assess in the short term, and there is a lot of noise; many data issues may only begin to gradually transmit in April.
However, when Trump took office, the RMB price had already touched the upper limit of 7.42, but the price quickly fell back to 7.28. This rapid appreciation during that period cannot be entirely understood as a proactive intervention by the central bank or market expectations of US tariffs taking effect.
After all, the tariffs on trade with the US are real. If we say the appreciation is due to a balance in exports or a surge in exports, there is only one possibility: exports to the US ↓, exports to others ↑.
This is not difficult to understand; it can be seen at a glance through the RMB exchange rates with other countries.
It can be observed that starting from February 25, there has been a proactive depreciation of the currency against Europe, with an exaggerated intensity. In less than three months, the Euro/RMB went from 7.4 to 8.4, and the Pound/RMB from 8.8 to 9.8. In contrast, other US allies have been relatively stable, with the AUD/RMB showing very moderate performance, mostly small fluctuations within the range. This can be seen from the diplomatic attitude. The CAD/RMB shows signs of accelerating; no wonder we have been courting Canada recently.
Overall, the export obstacles to the US and its partners have mostly been absorbed by Europe, which maintains a neutral stance, achieving export balance or surplus. However, this was all before US tariffs appeared. With the implementation of US policies regarding transshipment trade or other allied trade policies, the exact impact is unknown. At the same time, Europe’s acceptance of so many CN goods may take some time to show its impact on itself. In other words, let the bullets fly for a while longer.
This exchange rate trend channel directly reflects the level of prosperity in exports to the US.
It can be seen that the central point of the channel has already moved up to the 7 level. Whether the policy can be eased depends on whether this position can be breached. It seems very uncertain, and for a long time to come, it will be a tug-of-war. However, overall, it is in the process of solving its own problems, and many uncertainties will keep the range fixed at the upper end of the central point. Unless something unexpected happens, this year’s fluctuation range will also be around 7/7.52.
From the current exchange rate performance, it is still okay; there hasn't been a complete decoupling, and it remains at the level of mutual confrontation on the street. This also means that many policies will have poor continuity and cannot be effectively implemented, so the market will likely fluctuate within a constant range.
Unless there are surprises, it will move within a range; if there are surprises, it will break the trend. Besides trade, what else? Is the main battlefield in East Asia for the next year?