On May 17th and 18th, the renminbi fell below the integer level of 7.0 against the US dollar for two consecutive days, setting a new low in nearly three years. This has sparked widespread attention in the market, with people discussing the trend and impact of the RMB exchange rate.

So, what is the reason for the RMB exchange rate to fall below the “7” mark? Fundamentally, there are two factors that affect exchange rate fluctuations: economic fundamentals and market expectations. Economic fundamentals mainly include balance of payments, economic growth, inflation level, interest rate level, etc.; Market expectations mainly include policy direction, risk appetite and hedging needs. These two aspects interact with each other and together determine the movement of the exchange rate.