December 26 Financial Gold Rush: RMB breaks through the 7.0 psychological barrier against the US dollar, precious metals continue to surge, and global central bank policies diverge

The Renminbi’s Rally Accelerates as Multiple Factors Drive Up Exchange Rate

Following September 2024, the offshore RMB against the US dollar once again broke below the 7.0 level, with the intraday low reaching 6.9960 on Thursday (December 25), marking the best performance since Q3 2024. Meanwhile, the onshore RMB/USD exchange rate also hit a new low of 7.0051, the lowest since May 2023.

The driving forces behind the RMB’s appreciation stem from the end-of-year settlement wave and the lack of rebound support for the US dollar. Traders at Chinese banks reported very strong demand for foreign exchange settlement, and the dollar’s weakness has further amplified this effect, with bullish expectations now aligned.

It is also noteworthy that the RMB’s appreciation subtly reflects the People’s Bank of China’s (PBOC) policy intentions. Goldman Sachs’ latest research report pointed out that the PBOC has recently oscillated between describing the currency as “resilient” and “flexible,” implying a tendency to allow the RMB to strengthen gradually while avoiding an overly rapid appreciation. Goldman Sachs Chief Economist Xinquan Chen analyzed that, from the emphasis on “enhancing exchange rate resilience” in September, to the shift towards “maintaining exchange rate flexibility” in November, and the reintroduction of “exchange rate resilience” in Q4, it is clear that the central bank is deliberately moderating the pace of RMB’s rise.

Regarding future trends, Goldman Sachs maintains its previous forecasts: in 3, 6, and 12 months, the USD/CNY exchange rate will fall back to 6.95, 6.90, and 6.85 respectively. Meanwhile, traders generally expect the RMB to continue approaching the 7.0 psychological level in the short term, but the specific pace will depend on the stance of major state-owned banks.

Precious Metals Reach New Highs Again, Gold and Silver Hit Historic Records

On Friday (December 26), the commodity markets experienced a rally. Gold surged to $4,504 per ounce, and silver rose to $73.67 per ounce, both hitting record highs. This rally reflects growing investor concerns over slowing global economic growth and uncertainty in central bank policies.

Federal Reserve Shifts to a Dovish Stance, Rate Cuts Expected in 2026

Looking ahead to next year, Bank of America (BofA) has issued new policy forecasts. The bank expects the Federal Reserve to cut interest rates once in June and once in July, ending this year’s rate-cutting cycle. Meanwhile, the 10-year US Treasury yield is expected to fall back to the 4.00%-4.25% range by year-end, with further downside risks not to be ignored. This indicates that the global borrowing environment will loosen slightly compared to 2024-2025 but will not return to the ultra-low interest rate era of the past.

Bank of Japan Maintains Hawkish Stance, Continues Rate Hikes

Bank of Japan Governor Ueda Kazuo recently reiterated that Japan’s core inflation is steadily approaching the 2% target set by the central bank and that rate hikes will continue. Ueda pointed out that, barring significant shocks to the economy, the labor market will remain tight, exerting upward pressure on wages—driven by structural factors such as the declining working-age population that cannot be reversed.

He further noted that companies are raising prices in food and other consumer sectors to cope with rising labor and raw material costs, indicating that Japan is forming a mechanism where wages and inflation rise in tandem. As economic and price conditions improve, the central bank will continue to raise the benchmark interest rate, helping Japan achieve its 2% inflation target and promote long-term economic growth.

Japan’s New Fiscal Year Budget Hits Record High, Debt Dependency Declines

Prime Minister Sanae Sato announced the new fiscal year budget starting April 2026, totaling 122.3 trillion yen, an increase of about 6.3% from this year’s 115.2 trillion yen, setting a record for initial budgets.

Surprisingly, despite the record-high budget scale, the government successfully controlled debt levels. The issuance of new government bonds was limited to 29.6 trillion yen, the second consecutive year below the critical 30 trillion yen mark. More importantly, the debt dependency ratio decreased from 24.9% in the preliminary budget for FY2025 to 24.2%, the first time in 27 years to fall below 30%. Sato emphasized that this budget strikes a balance between maintaining fiscal discipline and achieving economic growth. Supported by this positive news, the yield on Japan’s 40-year government bonds fell by 7 basis points to 3.62%, hitting a new low since mid-November.

Global Semiconductor Industry Achieves Historic Breakthrough, Leading Companies Show Strength

Vivek Arya, a semiconductor analyst at Bank of America, stated that the global semiconductor industry remains in a decade-long structural transformation, with a strong overall upward trend led by clearly competitive leading companies. The analyst predicts that global semiconductor sales will grow by 30% in 2026, surpassing the $1 trillion milestone for the first time in history.

Arya emphasized that companies with high-margin structures and solid market positions will continue to be the main focus of investment. He named six promising companies: NVIDIA, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems, as his top investment picks for the coming year.

In contrast, CFRA Chief Investment Strategist Sam Stovall offered a more cautious outlook for the stock market. He believes that replicating this year’s double-digit gains would require all engines to run at full speed. The firm expects the S&P 500 to reach 7,400 points by the end of 2026, only about a 7% increase from current levels, suggesting that US stocks may struggle to deliver such strong gains again next year.

Chip Giants and Startups Join Forces, Competition in Inference Chips Intensifies

Details of NVIDIA’s collaboration with AI chip startup Groq have been revealed. Although there were reports that NVIDIA would acquire Groq for $20 billion in cash, NVIDIA later clarified that the agreement was for licensing, not an acquisition. Under the partnership, NVIDIA obtained a license to use Groq’s chip technology and hired Groq’s current CEO Simon Edwards. Groq will continue to operate as an independent company, and its cloud business will also continue, but founders Jonathan Ross, President Sunny Madra, and other engineering team members will join NVIDIA.

Groq, which completed a $750 million funding round in September with a valuation of $6.9 billion—more than doubling from $2.8 billion in August last year—focuses on the “inference” domain—responding to user requests with trained AI models. While NVIDIA dominates in AI model training, the inference market faces much fiercer competition. This partnership with Groq will help NVIDIA strengthen its position in this field.