htmlOn the evening of September 15, the offshore RMB exchange rate against the US dollar broke the "7" integer mark.
On September 15, the offshore RMB exchange rate against the US dollar that hovered at the 6.9 mark for many days broke the "7" integer mark. According to Wind data, as of 19:00 p.m. on September 15, the offshore RMB was 7.0071 against the US dollar.
Even though the market already had expectations, the offshore RMB exchange rate against the US dollar that night still attracted a lot of attention and discussion. After the "psychological threshold" of , which has been paid attention to by the market for a long time, the market will inevitably produce concerns about whether the "7" will cause the gathering of expectations of depreciation and whether the RMB exchange rate against the US dollar will decline sharply.
Although the RMB has depreciated against the US dollar in the short term recently, there is still pressure to depreciate in the short term. But experts unanimously agree that the RMB does not have the basis for continuous depreciation. China's foreign exchange market is operating normally, cross-border capital flows are in order, and the spillover effect of US monetary policy is controllable. The long-term positive fundamentals of China's economy have not changed. In addition, the People's Bank of China still has sufficient policy tools to stabilize the exchange rate, and the exchange rate issue will not hinder monetary policy regulation. In the short term, two-way fluctuations should be the norm. In the long run, the world's recognition of the RMB will continue to increase.
Offshore RMB exchange rate against the US dollar breaks "7"
Short-term depreciation pressure remains
0 On the evening of September 15, the offshore RMB exchange rate against the US dollar, which hovered at the 6.9 mark for many days, broke the "7" integer mark. In fact, since , the RMB has shown a rapid depreciation against the US dollar since August 12, the market has already expected "7".
In response to the recent trend of the RMB exchange rate, Liu Guoqiang, Vice Governor of the People's Bank of China, made a clear response at the regular briefing on the State Council's policies held recently. He pointed out that recently, the RMB exchange rate has been affected by factors such as the United States' increased monetary policy adjustments. Against the backdrop of the appreciation of the US dollar, other reserve currencies in the SDR basket have depreciated significantly against the US dollar. However, the RMB depreciation is relatively small, and in the SDR basket, the RMB appreciates against non-USD currencies except for depreciating against the US dollar. Wen Bin, chief economist of Minsheng Bank, also said that the offshore exchange rate of the RMB broke the "7" again after two years, mainly due to the accelerated tightening of monetary policy in order to suppress high inflation. As the US dollar index continues to strengthen, most non-US dollar currencies including the RMB have depreciated to varying degrees. Compared with the currencies of major developed economies such as the pound, the euro, and the Japanese yen, the depreciation rate of the RMB is relatively small, and the RMB exchange rate index is generally stable.
Director of Yingda Securities Research Institute Zheng Houcheng told Securities Times reporter that the offshore RMB exchange rate breaks "7" in line with expectations. From the perspective of the US dollar index, the US dollar index, as a safe-haven currency, will remain strong in the short term due to factors such as the "Russia-Ukraine conflict" and the global economy facing recession. The RMB exchange rate is highly correlated with the US dollar index, indicating that the RMB exchange rate is likely to be under pressure in the short term .
Oriental Jincheng Chief macro analyst Wang Qing also believes that the US dollar may remain strong in the past phase in the future, and the RMB may still have certain depreciation pressure against the US dollar. However, with the strengthening of the domestic economic recovery momentum and the expectation of my country's international balance of payments is expected to maintain a surplus, it is difficult to effectively gather the expectations of RMB depreciation. The short-term "breaking 7" does not mean that the RMB exchange rate will experience a new round of sharp downward trend.
There is no basis for continuous depreciation of the RMB exchange rate
As the exchange rate "psychological threshold" that the market has been concerned about for a long time, the market will inevitably produce concerns about whether the breaking "7" will cause the gathering of depreciation expectations and whether the RMB exchange rate against the US dollar will decline sharply.
"The RMB has not depreciated in a comprehensive manner." Liu Guoqiang said that at present, China's foreign exchange market is operating normally, and cross-border capital flows are in an orderly manner. Although the spillover effect of US monetary policy has been affected, the impact is controllable. This is due to the fact that China's economy has not changed its long-term positive fundamentals and its economic resilience is relatively strong.In addition, thanks to the continuous deepening of the exchange rate system reform based on market supply and demand, the elasticity of the exchange rate has also been significantly enhanced.
Wen Bin also pointed out that from the perspective of my country's economic fundamentals, the growth rate of GDP in the third quarter is expected to rebound significantly compared with the second quarter, the inflation level is moderate and controllable, and the balance of payments is good, especially the basic balance of payments projects such as current account and direct investment 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.
It is worth noting that on September 15, the August bank foreign exchange settlement and sales data released by State Administration of Foreign Exchange showed that the exchange settlement rate measured in August was 71%, an increase of 3 percentage points from the monthly average since this year, indicating that market entities maintained a rational trading model of "continuing foreign exchange at high prices" and their willingness to settle foreign exchange has been enhanced; the exchange sale rate measured in foreign exchange sales was 67%, which was basically the same as the monthly average since this year, and the overall willingness of market entities in was stable.
Both direction fluctuations have gradually become the norm central bank sufficient exchange rate stabilization tools
Regarding the long-term trend of the RMB, Liu Guoqiang said that the world's recognition of the RMB will continue to increase in the future. In the short term, two-way fluctuations should be a normal state, and there will be no " unilateral market ".
He also said that the exchange rate point is not accurate, so don’t bet on a certain point . "Reasonable balance and basic stability are what we like, and we also have the strength to support it. I don't think anything will happen, and I am not allowed to happen."
In Wang Qing's view, it is expected that the RMB will maintain a reverse volatility pattern similar to the trend of the US dollar index this year. In this process, there is no point that must be held. The real important thing is to keep the RMB exchange rate index basically stable. In addition, the current regulatory authorities have a rich policy tool for regulating foreign exchange markets, so exchange rate factors will not have a substantial constraint on the flexible adjustment of monetary policy in the second half of the year.
On September 5, in order to improve the ability of financial institutions to use foreign exchange funds, the People's Bank of China decided to lower the reserve ratio of foreign exchange deposits by 2 percentage points from September 15, 2022, that is, the reserve ratio of foreign exchange deposits is lowered from the current 8% to 6%. Wang Youxin, a senior researcher at the China Banking Institute, previously told the Securities Times reporter that the foreign exchange reserve ratio is an important macro-prudential policy tool for cross-border capital flows. At this time, adjusting the foreign exchange deposit reserve ratio can play a countercyclical role well, improve the foreign exchange supply and demand situation, release policy signals, and play a role in stabilizing the exchange rate and market sentiment.
Wang Qing pointed out that in the next step, if the RMB exchange rate shows abnormal fluctuations that deviate from the US dollar index trend, the central bank can not only lower the foreign exchange reserve ratio, but also announce the restart of the countercyclical factor in a timely manner, raise the foreign exchange risk reserve ratio, increase the issuance scale of central bills in the offshore market, and strengthen cross-border capital liquidity management and other measures.
RMB exchange rate double breaks 7
8 questions and eight answers: How do individuals respond? What impact will it have on the stock market?
Why did the RMB exchange rate break "7" at this time? How much impact does the breaking "7" have on the balance of payments, financial markets, etc., and how should enterprises and individuals respond? The Paper has sorted out 8 tips as follows.
1 Why did the RMB depreciate against the US dollar and break the "7"?
Regarding the reasons for the decline of the RMB in this round, Liu Guoqiang, deputy governor of the People's Bank of China, gave an explanation at the briefing of the State Information Office on September 5. He said that the recent period is mainly due to the United States' increase in monetary policy adjustments. Against the background of the appreciation of the US dollar, other reserve currencies in the SDR basket have depreciated significantly against the US dollar, but compared with other non-US dollar currencies, the depreciation of the RMB is the smallest. In the SDR currency basket, the US dollar appreciates, and the RMB has also appreciated, but the US dollar appreciates a little more than the RMB. The RMB has not depreciated in a comprehensive manner. The view of the comprehensive research institution, the current round of RMB decline started on August 15, is not only affected by the strengthening of the US dollar, but also affected by factors such as deepening monetary policy differentiation between China and the United States and the recent pressure on domestic economic growth.
2 How do you view the exchange rate of the people's currency breaking "7" against the US dollar?
This time, the RMB exchange rate against the US dollar broke "7", which is the first time since August 2020.
However, many institutions pointed out in their reports that in the context of a strong dollar, the key point of "7" is no longer so important, and the fluctuations in exchange rate under the complex and changing international situation should be viewed rationally.
"The current weakening of the RMB exchange rate has overwhelmed the impact of the Federal Reserve's high inflation and the European energy crisis. Against the backdrop of a strong dollar, the RMB may still be under pressure in the short term, but the RMB exchange rate of 'breaks of 7 or not breaks 7' is no longer a key point." CITIC Securities pointed out.
For the highly-watched point of "7", the central bank once gave a metaphor for "reservoir" on August 5, 2019 (the first time the RMB spot exchange rate 11 broke through this mark in that day), that is, "the RMB exchange rate breaks '7'. This '7' is not age, it cannot come back in the past, nor is it a dam. Once it is broken through the flood, it will plummet thousands of miles; '7' is more like the water level of the reservoir. It is higher during the flood season, and it will fall again when it reaches the dry season, and it will rise and fall, which is normal. "
3 Next step, how to move the RMB exchange rate?
Liu Guoqiang said on the same occasion: "The long-term trend of the RMB should be clear. The recognition of the RMB in the future will continue to increase. This is a long-term trend. But in the short term, two-way fluctuations are a normal state. There are two-way fluctuations, and there will be no 'unilateral market', but the exchange rate point is not accurate. Don't bet on a certain point. Reasonable balance and basic stability are welcome, and we also have the strength to support it. I think nothing will happen, and there will be no accidents."
. The view of comprehensive institutions, under the background of downward pressure on the domestic economy, the RMB exchange rate still has expectations and pressure to depreciate. The subsequent RMB exchange rate will mainly depend on the US dollar index.
CITIC Securities pointed out that under the background of a strong US dollar, the RMB will still be under pressure in the short term. In the long run, the RMB trend will return to the basic supply and demand of the RMB. At present, my country's trade surplus is at a historical high, the service trade deficit is still at a low level, bank foreign exchange settlement and sale is still in a surplus, the stable balance of payments has not changed, and the basic support of the RMB is still there.
4. What impact does breaking "7" have on capital flow?
"At present, China's foreign exchange market is operating normally, and cross-border capital flows are in order. Although the spillover effect of US monetary policy is affected, the impact is controllable." Liu Guoqiang said at the briefing of the State Council Information Office.
Comprehensive institutional viewpoint, this round of depreciation has not had a strong impact on capital flows.
"Using exchange rate adjustment or allowing exchange rate depreciation to alleviate some of the endogenous tightening pressure is a temporary measure. As long as the exchange rate of the RMB against a basket of currencies remains stable, the RMB 'break of 7' will not trigger a panic of capital outflow or the RMB exchange rate' loss of anchor." Huatai Securities pointed out.
CICC pointed out that capital flows judged from indicators such as bond market, stock market, and FDI are expected to not experience significant weakening. This round of depreciation may drive some capital outflows, especially considering the background of the expected fermentation of Fed interest rate hikes , but the number of short-term trading funds is already limited, and the exchange rate of RMB against CFETS has not changed. Therefore, the pressure on this round of capital outflows and foreign reserves is relatively limited. The latest data from
shows that due to the combined effects of factors such as exchange rate conversion and asset price changes, the scale of foreign exchange reserves in August fell by US$49.2 billion compared with the end of July. Faced with the violent fluctuations in the international financial market, the Foreign Exchange Bureau emphasized, "my country efficiently coordinates epidemic prevention and control with economic and social development, implements a package of policies to stabilize the economy in depth, and maintains the economy within a reasonable range, which will help maintain the overall stability of the scale of foreign exchange reserves."
5 What else is there in the central bank’s box?
"811" Since the exchange rate reform , the central bank has continuously enriched its regulatory toolbox in responding to exchange rate fluctuations.
In addition to the foreign exchange deposit reserve ratio that has been used twice this year (April and September 5), the adjustment tools that have not yet been taken out in the central bank's toolbox also include the foreign exchange risk reserve ratio for forward foreign exchange sales business called the Chinese version of "Tobin Tax" (currently 0, with a maximum of 20%), the macro-prudent adjustment parameters of cross-border financing, and the adjustment of the parameters of countercyclical factors in the RMB mid-price formation mechanism, etc. In addition, the central bank has responded to exchange rate depreciation in extraordinary times by tightening RMB liquidity in the offshore market.
"The current fluctuation range of the RMB exchange rate is still within the policy orientation, mainly due to the pressure to stabilize growth and ensure employment exceeds the external balance, and the People's Bank of China's tolerance to exchange rates has increased." Everbright Securities believes that if the pressure of depreciation exceeds the policy tolerance bottom line, it is not ruled out that the forward foreign exchange sales risk reserve , countercyclical factors and other policy adjustment tools are introduced again.
6 How should residents and enterprises respond?
RMB broke the "7" against the US dollar. What impact will it have on the people? Do you need to exchange foreign exchange?
The central bank had previously given an answer when the RMB broke the "7" against the US dollar. In the view of the central bank, over the past 20 years, the RMB has risen more against the US dollar and a basket of currencies and depreciate less. The main financial assets of Chinese people are best protected in the RMB, and their external purchasing power has steadily increased.
At the same time, it should be noted that while this round of depreciation against the US dollar and the Hong Kong dollar and other strong US dollar currencies, since this year, the RMB, including the euro, the pound, the Japanese yen, etc., has appreciated. For example, the RMB has even appreciated by more than 12% this year, and the increase against the pound is close to 7%.
"The exchange rate fluctuation factors are complex, and the existence of the two-syllogism means that the exchange rate is a process of increasing two-way elasticity. The best response status of residents' enterprises to the exchange rate is to "look at it and do a good job of hedging, and not blindly betting on '. At the beginning of 2017, the market generally expected the RMB to depreciate, and enterprises made bets based on this, and the exchange rate appreciated sharply throughout the year, causing the total exchange loss of all A-share listed companies to reach 17 billion yuan." Zhang Yu, chief analyst of Huachuang Securities' macro group, pointed out.
Assistant Minister of Commerce Li Fei said on September 5 that the current external environment is becoming more complex and severe, and the risk factors affecting the RMB exchange rate have increased. The Ministry of Commerce will work with the People's Bank of China, the State Administration of Foreign Exchange and other departments to continue to guide foreign trade enterprises to establish a neutral awareness of exchange rate risk, encourage banking institutions to innovate and optimize products, and provide exchange rate hedging and cross-border RMB settlement services for more small and medium-sized foreign trade enterprises.
7 What is the impact on exports?
How much support can this round of RMB depreciation provide for export-oriented companies?
"In this cycle, China's economic situation, especially exports, weakened, and the 'reservoir' supporting the RMB is no longer the 'reservoir'. The RMB chooses to directly follow the depreciation of the US dollar index, while maintaining the stability of the CFETS basket exchange rate. On the one hand, this structure can appropriately depreciate to support exports, while at the same time, due to the stability of a basket of exchange rates, the pressure on the balance of payments is relatively small." CICC pointed out.
Guolian Securities points out that the impact of exchange rate on economic fundamentals is mainly reflected in the foreign trade level. From a trade perspective, the depreciation of the RMB is beneficial to export-oriented enterprises, and their competitive advantages and profit levels are expected to be strengthened; while it is relatively unfavorable for import trade. Judging from the data, the RMB has begun a depreciation cycle since April this year. After excluding the impact of the epidemic, exports have improved since May, with exports maintaining positive growth year-on-year, while imports continue to fluctuate at low levels year-on-year. It reflects that the depreciation of the RMB has a positive correlation for exports and a negative correlation for imports. According to the analysis of data from countries, the depreciation of the RMB is one of the factors that drive China's net exports of , but the net export situation is also affected by factors such as domestic economic fundamentals, the environment for international trade and the demand of import and export countries.
8 What is the impact on the financial market?
Zhang Yu pointed out that speed is more important than point.She believes that the equity market does not respond much to the absolute point of the exchange rate, but has a greater response to volatility. The rapid rise and fall will lead to increased volatility in A-shares, becoming the main marginal contradiction of equity.
Everbright Securities believes that in the stock market, the depreciation of the exchange rate has led to a decrease in the net inflow of the mainland stock connecting stocks, and even changes from net inflow to net outflow. Therefore, industries with a high proportion of shareholdings of overseas investors will be under pressure to pull back. In the bond market, since the domestic economic fundamentals are usually under pressure during the exchange rate depreciation period, the yield of China bonds has a strong downward force, and the pressure of overseas share reduction brought about by the exchange rate depreciation has a relatively limited impact on the yield of China bonds.
Original title: RMB exchange rate breaks "7"! Will it go down sharply? What is the impact? Expert: There is no basis for continuous depreciation (Securities Times)
Original title: The RMB exchange rate breaks 7. Eight questions and eight answers: How do individuals respond? What impact will it have on the stock market? (Pengpai News)
This article is comprehensive from Securities Times, Pengpai News
