Will "Panic FX Settlement" by Pending Settlement Funds Reoccur?

From August to October 2024, the unwinding of "carry trades" triggered "panic FX settlement" by export enterprises, once driving USDCNH below 7.0. According to our calculations, as of the end of July 2025, the accumulated pending FX settlement funds over the past three years amounted to $421.1 billion, with an average holding cost around 7.05. After the RMB exchange rate rapidly fell below the 7.10 mark, some of these pending settlement funds might rush to settle early. However, the difference in 2025 compared to 2024 is that export enterprises have enhanced their FX hedging. It is expected that the wave of FX settlement may unfold in a more gradual manner compared to 2024. Against the backdrop of the US dollar index maintaining structural weakness and rising short-term appreciation expectations for the RMB, it is anticipated that FX settlement funds may see concentrated release in the fourth quarter of 2025.

RMB Exchange Rate Outlook: Close Attention to the Central Parity Guidance Remains Necessary

The foreign exchange market bet on RMB "catch-up appreciation" over the past quarter and is now entering a phase where these expectations are being realized. Exchange rate policy management still adheres to a "bottom-line thinking" approach, aiming to prevent both consistent depreciation expectations and consistent appreciation expectations. If settlement funds create a "herding effect," exchange rate management policies may also implement counter-cyclical adjustments in a timely manner. Looking ahead at the future exchange rate trend, the central parity remains a crucial variable to observe. It is expected that the spot exchange rate and the central parity might achieve a "convergence of the three prices" around the 7.10 level.