How long will the devaluation of the RMB continue?
html On March 30, the central parity rate of the RMB exchange rate against the US dollar was reported at 6.5641, a decrease of 225 basis points from the previous trading day. At present, the central parity rate of the RMB against the US dollar, the spot market, and the offshore market have all reached new lows since December 2020.Since December 2020, the onshore RMB has reached a maximum of 6.4236. In four months, US$100,000 has appreciated by approximately 14,000 yuan.
Although the recent decline in the RMB exchange rate has expanded, if compared horizontally, the RMB is still relatively strong. The RMB is currently down about 0.36% so far this year, while the U.S. dollar index has risen by more than 3.2% during the same period, the Japanese yen has fallen by more than 5.7%, and the Korean won and the euro have also fallen by more than 4% and 3.5% respectively. Brazilian real fell as much as 9.7%, Argentine currency fell 8.4%.
Mid-April will be the next observation window for domestic monetary policy. Because April and May are traditional tax payment months, as the tax period approaches in mid-April, the pressure on the supply of interest rate bonds from April will also increase significantly, and the gap in base money will gradually appear. How will the central bank hedge at that time? It will become a window to observe whether the central bank’s monetary policy tone has been fine-tuned.
Slight depreciation hit a four-month low
html On March 30, data from the China Foreign Exchange Trading Center showed that the central parity rate of the RMB against the US dollar was reported at 6.5641, a decrease of 225 basis points from the previous trading day. On the previous trading day, the central parity rate of the RMB against the US dollar was reported at 6.5416. This is also the central parity rate of RMB against the US dollar, which has fallen for five consecutive trading days since last week, hitting a new low since December 2020.In the spot market, the RMB opened sharply lower against the US dollar, reaching 6.5796, setting a new low since December 1, 2020, and then fell into a volatile trend. In the offshore market, the RMB against the U.S. dollar once reached 6.5836, also hitting a new low since December 1, 2020.
Obviously, the decline in the RMB exchange rate has expanded in recent times, but if compared horizontally, the RMB is still relatively strong. The RMB has fallen by about 0.36% so far this year, while the US dollar index has risen by more than 3.2% during the same period, the Japanese yen has fallen by more than 5.7%, and the Korean won and the euro have also fallen by more than 4% and 3.5% respectively. The Brazilian real fell by 9.7% and the Argentinian currency fell by 8.4%.
In particular, since March, the U.S. dollar has continued to strengthen, with the U.S. dollar index rising from a low of less than 90 to 93, a new high since November 2020. Some "fragile" emerging markets, such as Turkey , Brazil and Russia, have decided to raise interest rates. . Brazil raised its benchmark interest rate by 75bp to 2.75% on March 17, 2021; Russia raised its benchmark interest rate by 25bp to 4.25% on March 22; Turkey has started raising interest rates since September 2020. As of March 19, the benchmark interest rate has Increased from 8.25% to 19%.
Compared with the above-mentioned emerging economies that are faced with the pressure of "having to" raise interest rates, China's RMB exchange rate is very strong on a global scale, and the market's overall willingness to settle foreign exchange is high, which has become an important factor supporting the stability of the exchange rate. Data previously released by the State Administration of Foreign Exchange show that the net foreign exchange settlement scale including spot, forward and options from December last year to February this year was close to 170 billion U.S. dollars. Judging from the relative performance of the RMB and the U.S. dollar in March, it can be expected that The net foreign exchange settlement in March will not be too low.
More emerging economies will "have to" raise interest rates
Although the RMB exchange rate is not expected to fall much in the short term, the market may still be ill-prepared for the potential risks of a stronger US dollar and needs to be paid close attention to. According to data from the U.S. Commodity Futures Trading Commission (CFTC), the net short position of the U.S. dollar held by speculators plummeted to 10.78 billion U.S. dollars in the past week, the lowest level since June last year. Many institutions have turned to be bullish on the U.S. dollar and have speculative long positions. It has recently turned sharply into a net long position.
On the contrary, speculative positions in the euro, especially the yen, have fallen sharply and even turned into net short positions. At the same time, after deducting exchange rate hedging costs, the interest rate difference between the United States and the United States has reached a new high since 2014. Therefore, U.S. debt is attractive to European and Japanese investors. Strength is significantly enhanced.
"The U.S. dollar may still have some support in the short term." Wang Hanfeng's team at CICC believes that looking forward, the above-mentioned supporting factors may be difficult to reverse in the short term from the fundamental, policy and trading levels.In this context, it is not ruled out that there will still be support in the short term. The 94~95 level before the epidemic escalated again in the United States in November last year can be used as a short-term reference.
This report believes that the strengthening of the U.S. dollar index is caused by the widening gap in growth expectations between the United States and other countries under the recent new round of fiscal stimulus and progress in epidemic control, the increased attractiveness of interest rate differentials after higher interest rates, and expectations of tightening monetary policy. Looking forward, the above-mentioned factors supporting the trend of the US dollar may be difficult to reverse in the short term. Fundamentally, the effects of the new round of fiscal stimulus in the United States are expected to be more concentrated in the next one or two months, reflected in household income and consumer spending; vaccination is expected to further accelerate, Biden said at the latest press conference last week It is planned to achieve the goal of 200 million doses of vaccination in the first 100 days of taking office (the end of April), which may make "herd immunity" come earlier, thereby promoting the resumption of production and the restoration of offline service consumption.
Obviously, in the current environment, we should try our best to consider the beneficial risk exposure of the appreciation of the US dollar. The risk exposure of emerging markets needs to be compressed. In the future, more emerging economies will "have to" raise interest rates and eventually fall into capital outflows and currency depreciation. , in the quagmire of stagnant growth.
According to EPFR data, since March 2020, the market value of Turkish stocks and bonds held by foreign investors has surged rapidly, once reaching near the historical peak. After Turkey started to raise interest rates in September 2020, there have been signs of foreign capital outflows, but judging from the market value level, There is still room for large outflows; similar to Turkey, foreign capital has continued to flow into the Russian stock and bond market since March 2020, and has now exceeded the pre-epidemic level; while the market value of foreign capital holdings in the Brazilian stock and bond market has been "cut in half" after the epidemic, and has continued to No obvious repair has occurred, indicating that there is less speculative "hot money" and there is little pressure to outflow.
Mid-April will be the next observation window for domestic monetary policy.
As a major manufacturing country, China is less affected by overseas markets due to its rich central bank monetary policy control mechanisms, strong ability to quell inflation, and complete overlapping industrial chains. Therefore, analysts expect that in the short term, interest rate hikes in emerging markets will not become the core factor affecting the shift in my country's monetary policy.
However, with the wording of "not making a sharp turn" in monetary policy removed from the press release of the first quarter monetary policy meeting, there has been ongoing discussion recently about whether the tone of the central bank's monetary policy will change. The latest central bank banker questionnaire also reflected that the credit market was in short supply. During the reporting period, the overall loan demand index was 77.5%, an increase of 5.9 percentage points from the previous quarter and an increase of 11.6 percentage points from the same period last year. It is extremely likely that the financing costs of the real economy will enter an upward trend. During the reporting period, the monetary policy sentiment index was 51.0%, a decrease of 7.2 percentage points from the previous quarter and a decrease of 21.8 percentage points from the same period last year.
Qu Qing, chief economist of Jianghai Securities, believes that the current financial situation is within the central bank's satisfactory range, and there is no need for the central bank to significantly relax or tighten monetary policy in the short term. Judging from the current situation, whether it is the DR007 interest rate that remains stable around 2.2%, the primary government stock certificate of deposit issuance interest rate around 3.05%, or the 10-year government bond yield around 3.2%, they are all within the range desired by the central bank. Inside.
Qu Qing said that mid-April will be the next observation window for monetary policy. April and May are traditional tax payment months. As the tax period approaches in mid-April, the pressure on the supply of interest rate bonds will also increase significantly starting from April. The gap in base money will gradually appear. How the central bank will hedge it will become a matter of observation. There is a window for fine-tuning the central bank’s monetary policy tone. Before mid-April, fiscal deposits at the end of the quarter combined with capital demand at the beginning of the quarter have significantly weakened, and the overall liquidity environment is expected to remain loose, which is still a relatively friendly time window for the bond market.
This article comes from brokerage China
