The increase once exceeded 700 basis points. Why did the offshore renminbi surge during the holiday?

During the "May Day" holiday, the offshore renminbi exchange rate against the US dollar rose to recapture the key level of 7.2.

Data showed that during the "May Day" holiday, the offshore renminbi exchange rate against the US dollar rose from 7.2312 to a high of 7.1644 since February, with a cumulative increase of more than 700 basis points.

"Behind this is the fact that the Hong Kong Hang Seng Index rose by almost 5% last week, driving up global capital's interest in allocating assets such as the renminbi exchange rate against the US dollar," a Hong Kong bank foreign exchange trader told reporters. In particular, many global funds increased their long positions in offshore renminbi while buying Hong Kong stocks.

In the view of industry insiders, this situation is "unusual". In the past, there has been a high positive correlation between the rise and fall of the offshore renminbi exchange rate and the inflow and outflow of northbound funds. In contrast, the correlation between the offshore renminbi exchange rate and the volatility of Hong Kong stocks is relatively low.

A Hong Kong private equity fund manager believes that the overseas capital that simultaneously bought Hong Kong stocks and offshore renminbi during the "May Day" holiday may be based on a new investment logic - they are optimistic about the continuous improvement of China's economic fundamentals, which will drive both the renminbi exchange rate and various stock assets in China to rise.

"Since the A-share market was closed during the 'May Day' holiday, some overseas investment institutions may have bought offshore renminbi as an alternative to betting on the A-share index," he analyzed. If it weren't for the rebound of the US dollar index last Friday, triggering the liquidation of offshore renminbi profit positions, the offshore renminbi may have risen above 7.15.

As of 13:00 on May 6, under the influence of the rebound of the US dollar index, the offshore renminbi exchange rate against the US dollar hovered around 7.2143.

In the view of industry insiders, given that the weaker-than-expected US non-farm employment data last Friday triggered expectations of a rise in the Federal Reserve's interest rate cut in September, coupled with the continuous improvement of China's economic fundamentals attracting overseas capital to continue to rush into the A-share market, the offshore renminbi exchange rate is still expected to steadily recover in the future.

After the opening of the A-share market on May 6, the net inflow of northbound funds exceeded 10 billion yuan at one point, providing strong support for the stabilization of the offshore renminbi during the day.

Multiple analysts from overseas investment institutions revealed that they have communicated with investors in the United States, Singapore, Tokyo, and other regions over the past month and found that the latter's trading sentiment, risk appetite, and interest in allocating Chinese stock assets have also been improving, which will help the offshore renminbi exchange rate to steadily recover.

Probing the Reasons for the Surge in Offshore Renminbi During the Holiday

Multiple industry insiders revealed that during the "May Day" holiday, the popularity of offshore renminbi was no less than that of Hong Kong stocks.

From May 1st to 3rd, the offshore renminbi exchange rate against the US dollar rose for three consecutive trading days, with a cumulative increase of more than 500 basis points. In particular, on May 3rd, the offshore renminbi exchange rate against the US dollar rose by more than 400 basis points at one point. If it weren't for the rebound of the US dollar index from 104.5 to above 105, the renminbi exchange rate may have risen above the key level of 7.15.

In the view of the above-mentioned Hong Kong bank foreign exchange trader, an important reason for the strong popularity of offshore renminbi among overseas capital is the significant increase in the Hang Seng Index in Hong Kong last week, which boosted global financial markets' preference for allocating assets to China and their confidence in betting on the renminbi.

He also believes that due to the closure of the A-share market during the "May Day" holiday, some overseas multi-strategy hedge funds used the surge in offshore renminbi as an alternative investment to betting on the A-share index. This is because they believe that the rise in Hong Kong stocks will inevitably drive the A-share index to continue to rise, and the rise in the A-share index will trigger further appreciation of the renminbi exchange rate.

Multiple sources told reporters that another reason for the surge in the offshore renminbi exchange