FED HIKE × RMB STRENGTH × FX FLOWS × EXPECTATIONS

Why Did the RMB Strengthen Beyond 6.70 Despite a Fed Rate Hike?

Global Wealth Allocation | RMB Strength Series E01 | Research date: 27 September 2026

The dollar was not the only driver. Trade receipts, cross-border flows, FX conversion and expectations jointly changed the balance of currency supply and demand.

Data context | On 16 September 2026, the Federal Reserve raised its target range by 25 basis points to 3.75%–4.00%. On 21 September, onshore spot USD/CNY traded as low as about 6.6950, while the official central parity was 6.7487. Spot trading and the central parity are different measures. SAFE reported August net cross-border inflows of US$62.4 billion for non-bank sectors and a US$48.5 billion bank FX settlement surplus; these are different statistical measures and should not be added or equated.

CORE VIEW

The 10-second take

The RMB's move beyond 6.70 does not mean the Fed hike failed, nor can it be explained by the dollar alone. China's cross-border flows, trade-related FX supply and expectations also shifted market supply and demand. The evidence supports near-term RMB strength—not a confirmed one-way appreciation trend.

+25bp

The Fed raised its target range to 3.75%–4.00% on 16 September; the dollar side had not turned accommodative.

6.6950

The onshore spot intraday level on 21 September; this was a traded spot rate, not the official central parity.

61.5%

The August corporate FX-receipt conversion ratio, 2.7 percentage points below the January–July average.

AUDIO SUMMARYWhy the RMB strengthened after a Fed hike—in about 75 seconds

Read transcript

On 16 September, the Federal Reserve raised rates by 25 basis points to a target range of 3.75% to 4.00%. Yet several days later, spot USD/CNY moved below 6.70.

That is not a contradiction. An exchange rate is the relative price of two currencies, so the dollar is only one side of the story.

In August, China's non-bank sectors recorded 62.4 billion US dollars in net cross-border inflows, while banks reported a 48.5 billion dollar foreign-exchange settlement surplus.

The timing of exporters' conversion decisions also matters, and weaker depreciation expectations can reduce both delayed conversion and early dollar buying.

But August's corporate conversion ratio did not rise, so a broad release of retained dollars has not been proven. ACIS sees near-term RMB strength and lower depreciation-tail risk—not a confirmed permanent appreciation trend.

RESEARCH BRIEF

The 1-minute brief

An exchange rate is the relative price of two currencies. A Fed hike matters for the dollar side, but it cannot determine the RMB's direction by itself.
SAFE reported US$62.4 billion in August net cross-border inflows for non-bank sectors and a US$48.5 billion bank FX settlement surplus, with trade-related flows providing an underlying source of foreign-currency supply.
Exporters receiving dollars do not necessarily convert them immediately. The timing of FX conversion changes the dollar supply available in the domestic market.
Expectations affect real orders. When depreciation fears ease, exporters may become less inclined to delay conversion, while prospective dollar buyers may feel less urgency to buy in advance.
August's 61.5% corporate conversion ratio does not show a broad release of previously retained dollars. ACIS therefore reads the move as near-term RMB strength, not confirmation of a permanent appreciation cycle.

01 · FX CONVERSION

How US$1 million can affect the RMB

Export receipt

A company receives dollars, but they have not necessarily entered the spot conversion market.

Retain or convert

Timing follows operating needs, risk management and currency expectations.

Dollar supply

Conversion adds current dollar selling; retention postpones that supply.

RMB exchange rate

Supply and demand interact with the dollar, rates, expectations and policy signals.

Export receipts create potential dollar supply; conversion is what turns that potential into current dollar selling.

02 · EXPECTATIONS LOOP

Expectations are not just sentiment—they change real orders

Stronger depreciation fears

Companies may retain dollars and delay conversion; future users may buy dollars early.

Depreciation fears ease

The urgency to delay conversion or pre-buy dollars may fall.

03 · DEEP ANALYSIS

Why a stronger RMB after a Fed hike is not a contradiction

The Fed's 25-basis-point increase on 16 September would normally improve the relative appeal of dollar assets. But an exchange rate reflects both sides of the currency pair. Even with higher US rates, the RMB can strengthen if domestic dollar supply rises or demand for dollars eases.

The spot move beyond 6.70 on 21 September shows several forces operating at once. It does not mean rate differentials, the dollar or Fed policy ceased to matter. The sequence of events also does not prove that the Fed hike directly caused RMB appreciation.

04 · DEEP ANALYSIS

Trade and cross-border flows form the supply-and-demand foundation

Non-bank sectors recorded US$62.4 billion in August net cross-border inflows, while banks reported a US$48.5 billion FX settlement surplus. Strong trade-related inflows supplied actual foreign currency to the domestic market.

An aggregate monthly surplus cannot prove that one factor explains the entire currency move, or that the same conditions will persist indefinitely.

05 · DEEP ANALYSIS

Receiving export dollars is not the same as converting them immediately

An exporter receiving US$1 million may sell the dollars for RMB immediately, or retain them lawfully for future expenses or a later conversion date.

Export earnings determine potential FX supply; conversion decisions determine how much of that supply reaches the market today. Both questions matter for understanding the RMB.

06 · DEEP ANALYSIS

How expectations become real orders

If companies expect further RMB depreciation, they may delay conversion. Households or businesses with future dollar needs may also buy dollars early, reducing dollar supply and increasing demand.

When depreciation fears ease, both behaviors can reverse. Expectations are not merely sentiment: they enter the market through actual conversion and purchase orders.

07 · DEEP ANALYSIS

Previously retained dollars are potential supply, not a proven release

Dollars retained by companies in earlier periods may become future conversion supply. Public data, however, do not precisely quantify that stock or prove that it has already been released in a concentrated wave.

The August corporate conversion ratio was 61.5%, 2.7 percentage points below the January–July average. SAFE described conversion and retention intentions as broadly stable. The evidence supports monitoring potential supply—not declaring that a conversion wave has begun.

08 · DEEP ANALYSIS

The policy objective is not one-way appreciation

The policy objective remains greater exchange-rate flexibility, prevention of overshooting and broad stability around a reasonable equilibrium. Recent spot and central-parity movements do not establish an objective of one-way RMB appreciation.

ACIS sees conditional near-term RMB strength and lower depreciation-tail risk. That judgment should be reassessed if the dollar strengthens materially, cross-border flows reverse or domestic fundamentals deteriorate.

09 · DECISION FRAME

What / So What / Now What

WHAT

Spot USD/CNY moved below 6.70 after a Fed hike, showing that dollar-side analysis alone is incomplete.

SO WHAT

Trade flows, conversion behavior and expectations can alter near-term FX supply and demand even when rate differentials appear unfavorable.

NOW WHAT

Do not extrapolate one breakout into a permanent trend. Track cross-border flows, corporate conversion ratios and the relationship between spot trading and the central parity.

10 · HISTORICAL RECORD

The hit and the miss both stay in the record

Pre-event record

Before the 16 September FOMC decision, ACIS expected a 25-basis-point increase to 3.75%–4.00%; the actual decision matched that call.

The miss remains visible

The subsequent prediction check recorded that ACIS underestimated the committee's further-tightening bias—a partial miss on the policy-path signal.

Status of this article

E01 explains the RMB move after it occurred. It was not a pre-event FX forecast, and the break of 6.70 is not scored as an ACIS prediction hit.

11 · VALIDATION

What would strengthen—or overturn—the current view

01Cross-border flows
Test whether non-bank sectors continue to record net inflows rather than relying on one month.
02Conversion behavior
Track whether the bank settlement surplus persists and whether the corporate conversion ratio rises for several months.
03Price and policy
Compare the central parity, onshore spot and offshore spot for orderly movement rather than divergence or overshooting.
04Reversal conditions
Reduce the near-term-strength view if cross-border flows turn materially negative, the settlement surplus reverses, the dollar strengthens persistently or domestic fundamentals deteriorate.

12 · RISK BOUNDARIES

Near-term strength does not lock in a long-term trend

A daily or weekly exchange-rate move cannot establish a long-term trend and can reverse quickly.
The Fed decision preceded the RMB move, but timing alone does not prove a single direct causal relationship.
Spot USD/CNY, the central parity and the dollar index are different measures; conflating them can produce false conclusions.
Cross-border, settlement and trade data may contain seasonal, timing and one-off effects.

Key concepts

Spot exchange rate: The traded price for near-term FX delivery; 6.6950 in this article is the onshore spot intraday level.
RMB central parity: The daily reference rate published under authorization by the China Foreign Exchange Trade System; it is not the same as the traded spot rate.
FX conversion: Selling foreign currency to a bank and receiving RMB.
Foreign-currency retention: Continuing to hold foreign currency in accordance with applicable rules and operating needs.

Frequently asked questions

Does a Fed hike normally weaken the RMB?

Not necessarily. A hike can support the dollar, but the RMB also reflects China's cross-border flows, trade balance, conversion behavior, expectations and policy signals.

What does FX conversion mean?

It means selling foreign currency to a bank in exchange for RMB. Export receipts are potential supply; conversion turns them into current dollar selling in the market.

Does the US$48.5 billion surplus prove a wave of corporate dollar selling?

No. The surplus is an aggregate market outcome. August's corporate conversion ratio was below the January–July average, while SAFE described conversion and retention intentions as broadly stable.

Does breaking 6.70 confirm a long-term appreciation cycle?

No. The evidence supports near-term strength, but dollar performance, capital flows, domestic growth and policy conditions can all change the direction.

Should households immediately convert currency or change overseas holdings?

One exchange-rate level is not an allocation instruction. Decisions should reflect future spending currencies, the job of each asset, time horizon, valuation and lawful access. E02 develops the allocation framework.

Sources and research scope

This page distinguishes the Fed's 16 September decision from the RMB's 21 September spot-market move and does not claim a single direct causal relationship. Spot USD/CNY, the official central parity and the dollar index are different measures. August flow and settlement data are public facts; interpretations concerning expectations, potential retained-dollar supply and near-term RMB strength are ACIS research judgments. Flows and currency direction can reverse. For research and education only; not personalized investment, trading, foreign-exchange, legal or tax advice.

Related research

E02 | Why a Stronger RMB Is a Good Time to Revisit Global Asset Allocation

Once the near-term RMB move is understood, the next question is not whether 6.6 or 6.8 comes next. It is whether a household depends too heavily on one currency, one market and one set of risk drivers.