December 26 Financial News: RMB/USD breaks 7 for the first time in months, gold and silver both hit record highs

The Renminbi Strengthens and Breaks Through Psychological Barrier, Central Bank’s Attitude Becomes Key

On Thursday (December 25), the offshore Renminbi (CNH) appreciated strongly against the US dollar, with the USD/CNH falling to 6.9965, marking the first time since September 2024 that it broke below the “7” level. During trading, it rose as high as 6.9960. The onshore Renminbi (USD/CNY) also declined to 7.0051, hitting a new low since May 2023.

End-of-year demand for foreign exchange settlement and sales, combined with the lack of rebound momentum in the US dollar, has become the main driver of the Renminbi’s appreciation. A trader from a Chinese-funded bank stated that the current market demand for FX settlement and sales is high, and external dollar weakness has already formed a consensus on bullishness towards the Renminbi. However, whether the Renminbi can continue approaching the 7-level in the short term still depends on the attitude of major state-owned banks.

Goldman Sachs’ latest research reveals that the recent alternating statements by the People’s Bank of China (PBOC) between “resilience” and “flexibility” hint at a pattern—suggesting that the PBOC may lean towards currency appreciation but also aims to avoid too rapid a pace. Goldman Sachs economist Xinquan Chen pointed out that the shift from emphasizing “enhancing exchange rate resilience” in September to “maintaining exchange rate flexibility” in November indicates a gradual adjustment in the PBOC’s tolerance for Renminbi appreciation. As the Renminbi has recently accelerated its rise again, the PBOC’s renewed emphasis on exchange rate resilience suggests an intention to slow the appreciation pace. Goldman Sachs maintains its forecast that in 3, 6, and 12 months, the USD/CNY will reach 6.95, 6.90, and 6.85 respectively.

Precious Metals Reach New Highs, Gold Breaks $4,500 Level

On Friday (December 26), the precious metals market experienced a “double harvest,” with gold temporarily breaking through the $4,500 mark to $4,504, and silver rising to $73.67, both setting new historical highs. Despite the global major markets being closed for Christmas and trading being light, this rally remains robust, reflecting sustained market demand for safe-haven and value preservation in precious metals.

Fed Rate Cut Expectations Rise, US Treasury Yields Under Pressure

Bank of America’s latest outlook indicates that market expectations for the Federal Reserve’s policy next year are becoming clearer. The bank expects the Fed to cut interest rates twice in June and July 2026, and forecasts the 10-year US Treasury yield to fall back to the 4% to 4.25% range by the end of the year, with potential for further decline. This suggests that global borrowing conditions will be slightly looser in 2024-2025 compared to previous years but unlikely to return to the ultra-low interest rate era that previously fueled housing and stock market booms.

Bank of Japan Continues Rate Hikes, Yen Supported for Appreciation

Bank of Japan Governor Ueda Kazuo stated that Japan’s core inflation is gradually accelerating and approaching the BOJ’s 2% target, and the bank is prepared to continue raising interest rates. Ueda pointed out that unless the economy faces significant negative shocks, the labor market will remain tight, exerting upward pressure on wages. Companies are passing rising costs onto consumers in food and other sectors, and Japan is forming a mechanism where wages and inflation rise in tandem. With rate hike expectations becoming clearer, the yen is expected to be supported—market data shows that 10,000 yen is currently worth about 447 RMB, an appreciation of over 3% since the beginning of the year.

Japan’s New Fiscal Year Budget Hits Record High, Dependence on Bonds Falls Below 30% for the First Time

Japanese Prime Minister Suga Satoshi announced that the budget for the new fiscal year starting April 2026 will total approximately 122.3 trillion yen, a 6.3% increase from the previous year, setting a record high. However, the government aims to maintain fiscal discipline—new bond issuance will be limited to 29.6 trillion yen, the second consecutive year below 30 trillion yen; dependence on debt decreased from 24.9% in the current fiscal year to 24.2%, marking the first time in 27 years that it fell below 30%. Following this news, the yield on Japan’s 40-year government bonds dropped 7 basis points to 3.62%, the lowest since November 17.

Chip Industry Optimistic for 2026, Semiconductor Sales Expected to Break $1 Trillion

Vivek Arya, semiconductor analyst at Bank of America, stated that AI development remains in the midst 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 30% in 2026, potentially surpassing the $1 trillion milestone for the first time. He emphasized that companies with high-margin structures and solid market positions will be the focus of investment, naming Nvidia, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems as his most confident investment targets.

However, CFRA chief investment strategist Sam Stovall expressed skepticism, saying that for US stocks to achieve double-digit gains again, “all engines need to be running.” He estimates the S&P 500 target for the end of 2026 at 7,400 points, only about 7% higher than current levels. While the market may continue to rise next year, increasing risks suggest it may not replicate the strong performance of 2024.

Nvidia Authorized to Use Groq Technology to Strengthen Inference Chip Portfolio

Nvidia has reached an licensing agreement with AI chip startup Groq. Under the agreement, Nvidia can use Groq’s chip technology and has hired its CEO Simon Edwards; Groq will continue to operate as an independent company, with its cloud business ongoing, and 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. The company focuses on the “inference” domain—responding to user requests with trained AI models. Although Nvidia dominates the AI training market, it faces challenges in the more competitive inference field. This partnership will help strengthen its position in this area.

Major global markets are closed for Christmas. US stock markets are closed all day on December 25 and reopen on December 26; Hong Kong markets are closed all day on December 25-26; European exchanges in London, Frankfurt, and Paris are closed on December 26 for Boxing Day; markets in Australia, Singapore, and other Asia-Pacific regions will also be closed according to local customs, leading to a significant decline in global trading activity.