The U.S. dollar index continues to climb, hitting a new high in the past 20 years. The exchange rates of the euro, pound, yen and other currencies against the U.S. dollar continue to hit new lows. Only the RMB has shown a stable and independent market. On July 13, the onshore RMB

The U.S. dollar index continues to climb, hitting a new high in the past 20 years. The exchange rates of the euro, pound, yen and other currencies against the U.S. dollar continue to hit new lows. Only the RMB has a stable independent market. On July 13, the onshore RMB exchange rate against the U.S. dollar opened up by 85 basis points, regaining the 6.73 mark. At the same time, the offshore RMB against the U.S. dollar rose in the short term, approaching the 6.73 mark. As of 10:26, the onshore and offshore RMB were trading at 6.7266 and 6.7354 against the US dollar respectively. The central parity rate of RMB against the U.S. dollar was reported at 6.7282 that day, 5 basis points higher than the previous trading day. In fact, today the U.S. dollar index is still at a high level above 108, the exchange rate of the U.S. dollar against the euro is almost equal, and the exchange rates of currencies such as the British pound and the Japanese yen against the U.S. dollar have also hit new lows recently. In contrast, the RMB exchange rate against the U.S. dollar is basically stable, showing an unmoved independent trend.

Fundamental factors provide strong support for the RMB

Since mid-June, the fluctuation range of the RMB exchange rate has gradually narrowed and stabilized, and has not been affected by the rapid rise of the US dollar index. Analysts generally believe that as the epidemic prevention and control situation improves and policies to stabilize growth are further increased and implemented, the economy will gradually bottom out. The gradually improving fundamental factors have become the "ballast stone" supporting the RMB exchange rate.

"Amidst the strength of the U.S. dollar, the RMB has maintained its resilience, reflecting the support of my country's post-epidemic economic recovery. CFETS RMB exchange rate index has also rebounded." Li Chao, chief economist of Zheshang Securities , predicts that the exchange rate of the RMB against the U.S. dollar will still remain stable in the third quarter. There are two-way fluctuations and certain depreciation pressures in certain stages. However, even in the context of further upward appreciation of the US dollar, the pressure on RMB depreciation is still controllable. In the medium to long term, in the next 8-10 years, the U.S. dollar will experience a downward cycle and the RMB exchange rate will enter an appreciation channel.

The recently released RMB outlook report for the second half of the year by CITIC Securities believes that domestic economic fundamentals are still the key factor in determining the RMB exchange rate in the medium and long term, and the direction of economic recovery provides support for the RMB. With the subsequent significant economic recovery, for the RMB, the pressure from weak economic fundamentals will gradually subside, and there is no basis for trend depreciation. However, it is worth noting that the strength and pace of economic recovery and the uncertainty of the epidemic may become gaming points for RMB exchange rate fluctuations.

Some institutions have also reminded everyone to pay attention to the short-term risks of the RMB exchange rate. Industrial Research pointed out that the focus of market transactions in the short term is the Federal Reserve tightening and the euro zone recession. The U.S. dollar index still has upside potential, and the euro will face the risk of parity exchange with the U.S. dollar. In terms of the RMB exchange rate, the scale of foreign capital inflows from Southbound Trading has reached a historically high level, and we need to be alert to the risk of marginal outflows of A shares funds. After the support for foreign investors to increase their holdings of A-shares weakens, upward pressure on foreign exchange dividends and the US dollar index will appear. We need to be vigilant that the RMB exchange rate will continue to repair its overvaluation. The U.S.'s reduction of tariffs on China may be less than expected, and the appreciation momentum of the RMB may be limited.

Recently, many currencies have depreciated sharply against the RMB.

A reporter from Beijing Youth Daily noticed that many mainstream currencies have continued to depreciate against the US dollar recently. At the same time, the exchange rates of these currencies against the RMB have also continued to hit new lows.

The People's Bank of China authorized the China Foreign Exchange Trading Center to announce that the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market on July 13, 2022 was: 1 US dollar to RMB 6.7282 yuan, 1 euro to RMB 6.7506 yuan, 100 yen to RMB 4.9169 Yuan, 1 pound to RMB 7.9928.

According to the RMB central parity trend chart on the central bank official website, this is the first time that the central parity rate of the pound against the yuan has fallen below the 8.0 mark, and it is also a new low since August 1, 2006. Compared with the high price around 15 years ago, the pound's exchange rate against the RMB has nearly halved. Especially since late May this year, the depreciation rate has exceeded 10%.

Equally "bleak" is the euro. Since 2008, the exchange rate of the euro against the yuan has been falling continuously, falling from a high of more than 10 to a level that is almost the same as that of the US dollar. Since late May, the euro has depreciated 6.7% against the yuan.

The Japanese yen is also a "sibling" of the euro and the pound.The last time the yen-renminbi exchange rate "broke 5" was in 2015. After March 2020, the Japanese yen exchange rate dropped from 6.66 to around 4.92 now, depreciating 26% in more than two years.

html On June 2, Pan Gongsheng, deputy governor of the Central Bank, said at a press conference that in the face of unexpected changes in the domestic and overseas environment, my country's foreign exchange market has generally remained stable and has shown strong resilience. The RMB exchange rate fluctuates in both directions and remains basically stable at a reasonable and balanced level. Since the beginning of this year, non-USD currencies have generally fallen due to the substantial strength of the US dollar. Compared with the world's major currencies, the RMB is relatively stable. From the perspective of multilateral exchange rates, the RMB exchange rate remains generally stable. In the first five months, the U.S. dollar index rose by about 6%. The exchange rates of the euro, Japanese yen, and pound against the U.S. dollar depreciated by about 6% to 10% respectively. The onshore RMB exchange rate against the U.S. dollar depreciated by about 4%.

There are advantages and disadvantages to the rise and fall of exchange rates. It is necessary to establish a neutral concept of exchange rate risk .

For a long time, there seems to be a view in the market: it seems that appreciation of the exchange rate is a good thing and depreciation is a bad thing. In fact, exchange rate changes are a double-edged sword. Whether they rise or fall, they have both advantages and disadvantages. For example, the appreciation of the RMB is good for importing companies because imported goods are cheaper. People who study abroad and travel on business are also happy because the same amount of RMB can be exchanged for more foreign currencies. However, for export enterprises, the appreciation of the local currency means an increase in the price of export commodities, which is not conducive to market competition. On the contrary, if the RMB depreciates, "some people will be happy and others will be worried."

Relevant persons in charge of the Central Bank and Foreign Exchange Administration have emphasized many times in recent years that enterprises must establish the concept of exchange rate risk neutrality, base themselves on their main business, treat the rise and fall of exchange rates rationally, and arrange their assets and liabilities very prudently. Depending on the currency and term, you should choose a hedging strategy that suits you.

BOC Securities Global Chief Economist and Managing Director Guan Tao recently stated that my country has the basic conditions to maintain the basic stability of the RMB exchange rate at a balanced and reasonable level. But a stable exchange rate does not mean a fixed exchange rate. On the contrary, as the RMB exchange rate tends to a balanced and reasonable level, it is prone to wide fluctuations due to fluctuations in fundamentals or sentiment. Regardless of whether it is short-term or medium- to long-term, uncertainty in exchange rates is inevitable, and two-way fluctuations are the norm. In response to the wide fluctuations in exchange rates in the future, all parties should actively formulate response plans. Enterprises must further strengthen the awareness of " risk-neutral ", establish strict financial discipline, adhere to the exchange rate risk management principle of "preserving value" rather than "adding value" as the core, avoid unilateral bets on exchange rate appreciation and depreciation, and actively use Use various risk hedging tools to achieve risk management.

Text/Beijing Youth Daily reporter Cheng Jie

editor/Fan Hongwei