Reporter of the Economic Business: Zhao Jingzhi Reporter of the Economic Business Business: Liao Dan
On September 21, Washington time, The U.S. Federal Reserve ended a two-day monetary policy meeting, announcing hiking 375 basis points, raising the target range of the federal funds rate to between 3% and 3.25%.
This is also the fifth time that the Federal Reserve has raised interest rates since March this year. Since March this year, the Federal Reserve has started a cycle of interest rate hikes to cope with high inflation, and has carried out five consecutive interest rate hikes, with a total of 300 basis points, setting the largest intensive interest rate hikes since 1981.
In the foreign exchange market, with the implementation of Fed interest rate hike , the offshore RMB against the US dollar also fell below 7.1 on the 22nd, reaching 7.1060 as of press time; the onshore RMB versus the US dollar exchange rate also reached 7.0967 today.
A few days ago, an expert told reporters that the RMB does not have a basis for depreciation. The short-term strong US dollar still has certain pressure on the RMB, but it is expected that the RMB will operate near the equilibrium level, and two-way fluctuations will become normalized.
USD index continues to strengthen
As the Federal Reserve starts a cycle of interest rate hikes this year, the USD index has been making rapid progress. The Fed's interest rate hike was implemented, and the US dollar strengthened again, with the US dollar index breaking through 110 points, and as of press time, it once reached 111.8330 points, a record high in 20 years.
Federal Chairman Powell said at a press conference after the monetary policy meeting that in order to reduce the current high inflation to the Fed's target level, the US economy will experience a period of growth below the trend level, and the labor market will also weaken, but this is a pain to bear, because it is particularly important to restore price stability.
Powell reiterated the hawkish signal he released in late August at the meeting, stressing the Federal Reserve's determination to lower inflation, and being wary of the serious consequences of premature easing monetary policy and allowing high inflation to solidify.
Since the Fed started a cycle of interest rate hikes this year, major currencies such as the euro, pound, and yen have collectively depreciated significantly against the US dollar.
In addition, according to Xinhua News Agency , the US rate hike caused the depreciation of currencies in many countries in the Middle East , and the inflation was high, causing serious impact on the national economy and people's lives.
Analysts from the Research and Development Department of Oriental Jincheng told reporters that the US dollar index has not yet completed its rise in the short term and will still be stronger. Analysts pointed out that the current differences in the fundamentals of the United States and Europe are still the core factors affecting the exchange rates of the United States and Europe. Relative growth advantages, the Federal Reserve's continued hawkish monetary policy stance, weakening import demand, and tightening of offshore dollar liquidity will all provide support for the US dollar. It is expected that the US dollar index will continue to run strongly in the future, and may rise to around 115-120 from the end of this year to the beginning of next year.
Expert: The RMB does not have a basis for continuous depreciation
On the evening of the 15th of this month, after the release of CPI in the United States in August, the market quickly raised its Fed's interest rate hike expectations, and at that time the offshore RMB exchange rate against the US dollar had exceeded 7. In fact, since August 15, the RMB has shown a rapid depreciation against the US dollar.
Prince Deputy Governor of the Central Bank Liu Guoqiang said at a regular policy briefing of the State Council on the 5th of this month that against the background of the appreciation of the US dollar, other reserve currencies in the SDR basket depreciated significantly against the US dollar, and the RMB also depreciated by about 8%, but compared with other non-US dollar currencies, the depreciation rate is the smallest. Moreover, in the SDR basket, except for depreciating the US dollar, the RMB appreciates against non-US dollar currencies, rather than depreciating the other currencies in the SDR basket. In this way, in the SDR currency basket, a basic situation is that the US dollar has appreciated and the RMB has appreciated, but the appreciation of the US dollar is greater than that of the RMB.
In addition, some experts pointed out to reporters in the middle of this month that the depreciation of the offshore RMB compared with the US dollar is mainly affected by the Federal Reserve's accelerated tightening of monetary policy to curb high inflation. In addition, from the perspective of my country's economic fundamentals, it is expected that the growth rate of GDP in the third quarter will rebound significantly compared with the second quarter. The inflation level is moderate and controllable, and the balance of payments is good. In particular, basic balance of payments projects such as current account and direct investment will maintain a high surplus, laying the foundation for the stable exchange rate of the RMB and the stable operation of the foreign exchange market. There is no foundation for the continuous depreciation of the RMB.
Analysts from the Research and Development Department of Oriental Jincheng also judged that with the support of the recovery of economic fundamentals, the risk of the RMB exchange rate falling from the US dollar trend in the future is not high, and the three major RMB exchange rate indexes are expected to remain stable.
China Currency Network shows that the three major RMB exchange rate indexes (i.e. CFETS RMB exchange rate index , BIS currency basket RMB exchange rate index, and SDR currency basket RMB exchange rate index) are all stable and operate near the equilibrium level.
"The short-term strong US dollar still has certain pressure on the RMB, but it is expected that the RMB will operate near the equilibrium level, and two-way fluctuations will become normalized." Another expert told reporters a few days ago.
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