01, About to Fall?

On the previous Friday, the exchange rate of the Chinese yuan reached the threshold of 7.0, with only a hair's breadth left to go.

The failure to break through at that time led some investors to worry about a potential decline in the yuan.

However, on this Monday, the yuan surged again, not only breaking through 7.0 but also reaching a high of 6.93 at one point.

But in the recent trading sessions, the yuan's closing exchange rate has been at 6.96, leading to concerns that the yuan might not be able to continue rising, and even more worrying, the fear of losing its upward momentum. With the Federal Reserve's interest rate hike next week, will the yuan fall again and break through 7.0?

02, About to Rise!

In fact, fluctuations in exchange rates, both up and down, are quite normal.

Especially with the US dollar still expected to raise interest rates, the impact on the global foreign exchange market is significant, so it is likely that the yuan will fluctuate around 7.0 several times in the coming period.

But it can be affirmed that, in the long term, the yuan's exchange rate will gradually strengthen.

This is especially true given the continuous influx of foreign exchange, as well as the positive news that future oil trade with Middle Eastern countries will be settled in yuan.03, Large Trade Surplus

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In the latest trade data released by China's General Administration of Customs, we can see that our country's foreign trade surplus has further expanded. In just one month, the surplus increased from 4.8 trillion yuan to 5.34 trillion yuan.

At present, this trend is not expected to reverse temporarily, and it is estimated that the annual surplus will break through six trillion yuan.

Another piece of data shows that in the first three quarters of this year, the surplus of goods in U.S. dollar terms reached 645.2 billion, with an average of over 200 billion U.S. dollars per quarter.

Considering that the data was relatively low in the second quarter of this year due to the severe impact of the pandemic, and currently in the fourth quarter, there may be a surge due to concerns about pandemic control, the annual goods trade surplus should reach 900 billion U.S. dollars.

That is to say, on the one hand, China's foreign trade enterprises obtain a large amount of foreign exchange income through exports, and on the other hand, they also use part of the foreign exchange income for imports, but after offsetting the two, there is still a net income of 900 billion U.S. dollars.

Most of these foreign exchange incomes will be exchanged back into yuan through settlement with the central bank. In fact, this is selling foreign exchange and buying yuan in the foreign exchange market, which is a strong support for the yuan exchange rate.

04, Capital Inflow

Compared with the continuous decline of U.S. dollar assets, the future prospects of yuan assets are more favored by foreign capital. Therefore, overseas funds flow into China's related markets through various means, including entering A-shares through northbound funds, buying stock assets, and shopping in the Hong Kong stock market and U.S.-listed Chinese concept stock market.

In addition to stock assets, yuan bonds are also very popular, and many countries have chosen to buy yuan bonds after selling U.S. bonds.Additionally, in the real estate sector, we have observed that some overseas dollar-based real estate funds are entering our country, primarily investing in commercial real estate projects.

Data from the Ministry of Commerce also indicates that our country's actual utilization of foreign investment has increased by nearly 15% compared to the same period last year.

Latest Positive News

The data mentioned above reflects facts that have occurred so far, and there is a significant piece of positive news for the foreseeable future. That is, within the next few years, our country will expand cooperation with the Gulf Cooperation Council (GCC) in the oil and gas sector, and the trade in oil and gas will be settled in Renminbi (RMB). The status of the RMB will be further significantly enhanced.