In 2023, the global interest rate hike and tidal wave, the financial market has been repeatedly repriced by unexpected events, the world's major currencies have gone through a year of huge fluctuations; although the RMB exchange rate has also experienced appreciation, depreciation and stabilization and recovery and other phases, but the overall is still maintained at a reasonable and balanced level. Looking forward to 2024, as China's various policy initiatives continue to play a role in the effect of economic operation rebound to the good, the RMB assets will continue to be attractive; superimposed on the weakening of the U.S. dollar index, favorable domestic and foreign factors will increase, the RMB exchange rate is expected to continue to rebound trend.

Increasing exchange rate flexibility.

Looking back at the whole year of 2023, the cumulative depreciation of the RMB against the US dollar median price was 1,181 basis points, or 1.7%, which was significantly narrowed compared to 9.23% in 2022; the cumulative decline of the onshore RMB against the US dollar was 1,406 basis points, or 2.02%; and the cumulative decline of the offshore RMB against the US dollar was 2,038 basis points, or 2.9%."Overall, RMB exchange rate volatility has increased in 2023, mainly affected by the 'resonance' of the complex internal and external environment." Zhou Maohua, a macro researcher at Everbright Bank's Financial Markets Department, analyzed that since the beginning of 2023, there have been fluctuations in the domestic macro-economy, superimposed on the uncertainty of the political and economic outlook of developed economies, and the dollar has become more volatile. However, in terms of the whole year, the RMB exchange rate has remained stable as a whole, continuing to fluctuate in both directions around a reasonable equilibrium level, and the RMB exchange rate against a basket of currencies has remained basically flat.Guan Tao, global chief economist of BOC Securities, said that the increased flexibility of the RMB exchange rate improves the autonomy of interest rate regulation and promotes macroeconomic stability; and the stability of economic fundamentals and the formation of support for exchange rate stability, the foreign exchange market operates more resilient, which contributes to the formation of a benign interaction between the interest rate and the exchange rate.

Resolute protection against the risk of exchange rate overshooting.

Both the Central Financial Work Conference and the Central Economic Work Conference clearly emphasized the need to "maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level". In the first half of 2023, the RMB exchange rate continued to weaken for a period of time, but did not see the regulatory layer to intervene.In this regard, China Merchants Securities Zhang Jingjing team analyzed that the market's pre-consensus expectations about the depreciation of the RMB exchange rate have not yet been formed, which is an important basis for the central bank to maintain its policy strength. "Since 2018, the focus of the central bank's foreign exchange policy is to manage the market's consistent expectations, rather than specific points." In fact, the exchange rate of the yuan against the dollar in the past few years has broken "7" several times, but returned to below "7" in a short time. So "7" is no longer a psychological barrier, the overall economy is stable, the people's expectations are stable.When will the RMB exchange rate return to below "7"? Industry experts said that the slow recovery of the yuan against the dollar exchange rate is mainly caused by the United States and China "diametrically opposed" to the monetary policy, and superimposed on the market on the existence of future economic growth concerns. With the Fed's interest rate cut is expected to strengthen and China's economic recovery, the probability that the RMB will rise steadily in 2024.
In Guan Tao's view, since the second half of 2023, the relevant parties have taken a series of exchange rate stabilization policy measures such as adjusting upward the macro-prudential adjustment parameters of cross-border financing, lowering the reserve ratio of foreign exchange deposits of financial institutions, and issuing additional offshore central bank notes, and the cumulative effect has gradually appeared. "Especially since November 20, 2023, the RMB exchange rate median price every other day volatility increased significantly, a change since October every other day fluctuations of only a few basis points of the situation, often dozens or even hundreds of basis points of adjustment, further ignited the market to do more enthusiasm for the RMB." Guan Tao said. Recently held the People's Bank of China Monetary Policy Committee 2023 Fourth Quarter Regular Meeting also clear, deepen the exchange rate market-oriented reforms, guide enterprises and financial institutions to adhere to the concept of "risk-neutral", comprehensive measures, correct deviations, stabilize expectations, resolutely correct pro-cyclical behavior, resolutely guard against the risk of exchange rate overshooting to prevent the formation of unilateral consistent expectations and self-reinforcement, and to prevent the formation of the exchange rate. 
RMB assets still attractive.

As the effects of macroeconomic policies become apparent, the economic fundamentals will be more solid, which is the biggest fundamental disk for the smooth operation of the exchange rate. China insists on implementing normal monetary policy, with sufficient policy space and a rich toolbox. Meanwhile, the RMB trend is clear, RMB assets are safe, and the world's recognition of the RMB will grow in the future. In addition, the RMB exchange rate formation mechanism is suitable for China's national conditions, which can give full play to the role of the market and the government's "two hands", has withstood many rounds of external shocks, and the People's Bank of China has accumulated a wealth of experience in coping with the situation, and is able to effectively manage the market's expectations, which can provide a solid guarantee for exchange rate stability.
The key to stabilizing the exchange rate still lies in stabilizing the economy. In the process of economic recovery wave development, zigzagging forward, stabilizing the exchange rate can not replace the necessary policy stimulus and structural adjustment, but more for economic adjustment to buy time. Industry experts believe that, despite the future will be international policy factors and market behavior perturbations, China and the United States in economic growth, price changes and balance of payments and other aspects of the relative changes will still promote the RMB exchange rate to continue to appreciate.