December 26 Financial News: Offshore RMB hits year-high, gold and silver reach new highs, global markets fluctuate at year-end

Renminbi Appreciation Creates New Historic Moment: Real-Time Exchange Rate Breaks Key Level Against US Dollar

The year-end currency market has ushered in a long-awaited highlight. On Thursday (December 25), Christmas trading day, offshore RMB against the US dollar broke through the 7.0 psychological barrier, reaching a high of 6.9960, the first time since September this year. Onshore RMB also strengthened to 7.0051, hitting a new low since May 2023.

Market analysts believe this rally is not accidental. End-of-year demand for foreign exchange remains strong, coupled with external dollar lack of a strong rebound, significantly accelerating RMB appreciation. A trader from a Chinese bank stated, “Currently, there are many foreign exchange settlement orders in the market, and the dollar isn’t showing much strength. The bullish outlook is quite consistent.” In the short term, the RMB is expected to continue approaching the 7 yuan mark, but the pace of appreciation will ultimately depend on the attitude of major state-owned banks.

Regarding the RMB’s direction, Goldman Sachs offers a new perspective. Economist Xinquan Chen pointed out that in recent months, the People’s Bank of China (PBOC) has oscillated between “resilience” and “flexibility” in its statements, which is a key signal—implying that the central bank may favor a stronger RMB but also wants to avoid rapid, uncontrollable appreciation. From the August emphasis on “enhancing exchange rate resilience,” to November’s “maintaining exchange rate flexibility,” and the renewed emphasis on “resilience” in Q4, the central bank’s stance is clear. Goldman Sachs maintains its USD/CNY forecast, reaching 6.95, 6.90, and 6.85 in 3, 6, and 12 months respectively, and expects the central bank to cut the reserve requirement ratio (RRR) by 50 basis points and lower interest rates by 10 basis points in Q1, with another 10 basis points cut in Q3.

Precious Metals Continue to Rise: Gold and Silver Hit Historic Highs

Driven by expectations of global central bank easing, the precious metals market shows strong performance. On Friday (December 26), gold briefly broke through the $4,500 mark to $4,504, while silver rose to $73.67, both hitting record highs. This performance reflects market expectations for future liquidity.

Fed Likely to Slow Rate Hikes Next Year; 10-Year US Treasury Yields May Fall

Bank of America has issued a new outlook on monetary policy for 2026. The bank expects the Federal Reserve to cut interest rates twice in June and July, and forecasts the 10-year US Treasury yield will fall back to the 4% to 4.25% range by year-end, with further downside possible. Overall, borrowing conditions will be somewhat looser than current levels but will not revert to ultra-low interest rate era.

Global Trading Enters “Hibernation” Due to Holidays; Market Activity Significantly Declines

The Christmas holiday has broadly impacted global trading. US stock markets were closed all day on December 25 and reopened on the 26th; Hong Kong markets also closed on December 25-26; major European exchanges in London, Frankfurt, and Paris were closed on December 25 and remained suspended on the 26th due to Boxing Day; markets in Australia, Singapore, and other Asia-Pacific regions also closed according to local customs. Overall, market activity has significantly declined.

Bank of Japan Maintains Firm Stance; Continued Rate Hikes Are Inevitable

Bank of Japan Governor Ueda Kazuo stated that Japan’s core inflation is gradually accelerating and steadily approaching the 2% target. Unless the economy faces significant negative shocks, the BOJ is prepared to continue raising interest rates. He emphasized that structural changes in the labor market are irreversible, and as the working-age population declines, upward pressure on wages will persist. Companies have already passed on rising labor and raw material costs in food and other goods and services, forming a mechanism where wages and inflation rise in tandem. Ueda pointed out that, given the real interest rates remain very low, if the baseline scenario is realized, the BOJ will continue to raise rates based on economic and price improvements.

Japan’s New Fiscal Year Budget Hits Record High; Fiscal Discipline Remains

Japanese Prime Minister Sanae Sato announced that the budget for the fiscal year starting April 2026 will total approximately 122.3 trillion yen, an increase of 6.3% from this fiscal year’s 115.2 trillion yen, setting a new record. Despite the budget scale reaching a new high, new government bond issuance will be limited to 29.6 trillion yen, the second consecutive year below 30 trillion yen. The debt dependency ratio will decrease from 24.9% in the initial budget for FY2025 to 24.2%, the first time below 30% in 27 years. Following this news, the yield on Japan’s 40-year government bonds fell 7 basis points to 3.62%, hitting a new low since November 17.

Chip Industry Turmoil: Semiconductor Sales Expected to Break $1 Trillion

Vivek Arya, semiconductor analyst at Bank of America, stated that AI development remains in the middle of a decade-long structural transformation, with the overall industry trend still upward, led by leading companies with clear competitive advantages. He predicts global semiconductor sales will grow by 30% by 2026, reaching the milestone of $1 trillion in annual sales for the first time. Companies with high-margin structures and solid market positions will continue to be core targets for investment. Bank of America named six companies as the most confident investment targets for 2026: NVIDIA, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems.

Notably, the partnership between NVIDIA and AI chip startup Groq has changed. Rumors initially suggested NVIDIA would acquire Groq for $20 billion in cash, but NVIDIA denied the deal, instead announcing an licensing agreement to use Groq’s chip technology and hiring Groq CEO Simon Edwards. Under the agreement, Groq will continue operating as an independent company, with its cloud business remaining active. Founders Jonathan Ross, President Sunny Madra, and other engineering team members will join NVIDIA. Groq 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. Groq focuses on “inference,” i.e., responding to user requests with trained AI models, an area where NVIDIA has been relatively weak in AI applications.

US Stock Market Gains Next Year May Be Difficult to Reproduce; S&P 500 Target at 7400 Points

Sam Stovall, Chief Investment Strategist at CFRA, pointed out that for the US stock market to achieve double-digit gains again, all engines must run at full speed. He forecasts the S&P 500 will reach 7,400 points by the end of 2026, about 7% higher than current levels. While the market may continue to rise next year, increasing adverse factors make it unlikely to replicate this year’s strong performance.