Dollar Rebound Has Limited Impact, Yuan Exchange Rate Shows Resilience

Recently, geopolitical conflicts in the Middle East have disrupted the global foreign exchange markets, causing the US dollar index to return to the 100 level for the first time in nearly four months, highlighting its safe-haven attribute. Against this backdrop, the RMB exchange rate has performed relatively steadily. On March 16, the onshore RMB against the US dollar broke through the 6.90 level during trading.

Looking ahead, market participants believe that the impact of the dollar rebound on the RMB exchange rate will be limited overall. External shocks may temporarily pressure the exchange rate trend, but will not change the fundamental long-term stability.

Safe-Haven Attribute Highlights, the Return of the Strong Dollar

Influenced by both internal and external factors, the US dollar index rose above 100 last week, with a cumulative appreciation of over 2.5% since March.

The main driver of this dollar strength is safe-haven demand. Jerry Chen, senior analyst at Gain Capital Group, told reporters that during major crises, the safe-haven role of the dollar remains irreplaceable, and market demand can lead to short-term tightening of dollar liquidity in international markets. If the oil supply crisis persists for a long time, oil prices and the dollar index are expected to maintain their upward trend.

A person from the Financial Markets Department of China Construction Bank stated that ongoing tensions in the Middle East have heightened market risk aversion. Meanwhile, Iran’s blockade of the Strait of Hormuz has significantly reduced oil supply, intensifying inflation concerns. As a result, expectations for Fed rate cuts have cooled considerably, both factors supporting the dollar.

As the dollar breaks through upward, market attention is focused on the movements of non-dollar currencies. Chen Chen, also from Gain Capital Group, warned that volatility in non-dollar currencies could significantly increase, especially for currencies of energy-import-dependent economies like the euro and yen.

Additionally, the international situation is changing market expectations for major central bank monetary policies. This week, the global capital markets will experience a “Super Central Bank Week”—the Federal Reserve, European Central Bank, Bank of England, and Bank of Japan will all announce interest rate decisions in quick succession. “It is expected that no ‘dovish’ signals will be issued by any of these central banks this week,” Chen Chen said. As inflation risks rise, the easing paths of these central banks may be forced to halt, while rate hike expectations are gradually increasing.

Potential for Increased Two-Way Fluctuations in the RMB Exchange Rate

Since March, the RMB exchange rate has experienced a rise followed by a decline. As of 4:30 pm on March 16, the onshore and offshore RMB against the US dollar were quoted at 6.8995 and 6.9025, respectively, with monthly declines of about 0.6%, significantly lower than the dollar’s appreciation during the same period.

“During the recent rapid rise of the dollar index, the RMB exchange rate has shown strong resilience,” said Wang Qing, chief macro analyst at Orient Securities. He noted that China’s export performance has been a key support. Data from the General Administration of Customs show that, in the first two months of 2026, China’s exports, measured in US dollars, increased by 21.8% year-on-year, well above the 6.6% growth in December last year and the 5.5% for the whole of last year.

In fact, since the beginning of the year, the RMB has shown a clear appreciation trend. “Even amid the dollar index rebound, the RMB has maintained an independent appreciation trend,” said Cheng Xiaoqing, senior researcher at CITIC Futures Research Institute, noting that this is related to seasonal capital inflows and the increase in capital account inflows.

Looking ahead, Cheng Xiaoqing believes that the dual-directional fluctuation of the RMB exchange rate may become more prominent: on one hand, the central bank has lowered the foreign exchange risk reserve ratio for forward sales from 20% to 0%, which helps increase forward foreign exchange purchase demand and ease appreciation pressure; on the other hand, if geopolitical conflicts in the Middle East persist, the dollar rebound could slow the RMB’s appreciation pace.