People's Bank of China recently decided to lower the reserve ratio of foreign exchange deposits from September 15th. Faced with the recent rapid depreciation of the RMB exchange rate against the US dollar, a timely and moderate reduction of the foreign exchange deposit reserve ratio will help regulate the supply and demand relationship of the foreign exchange market and smooth the fluctuations of the foreign exchange market. More importantly, this move sends a clear policy signal, which will help stabilize market expectations and enhance market confidence.
, like the RMB deposit reserve ratio, the foreign exchange deposit reserve ratio is also used to adjust the currency's derivation ability, but it regulates the liquidity of domestic foreign exchange. The reduction in the foreign exchange reserve ratio can release the freeze of foreign exchange quotas by commercial banks and increase the ability to derivate foreign exchange deposits, thereby boosting foreign exchange settlement demand and alleviating expectations of RMB depreciation. On the contrary, raising the foreign exchange reserve ratio will help alleviate the appreciation expectations of the RMB and avoid overshooting in the market.
html Since mid-August, the RMB has experienced another wave of depreciation. By August 29, the exchange rate against the US dollar had exceeded 6.9, and the depreciation in two weeks was close to 2.8%. At the same time, the balance of foreign exchange deposits of financial institutions has also continued to decline, falling to US$953.7 billion in July, down nearly 10% from the highest in March. Against this background, lowering the foreign exchange reserve ratio of financial institutions will help improve domestic and foreign exchange liquidity, expand the interest rate spread between RMB and foreign currencies, and help enhance the attractiveness of RMB assets, promote the balance of supply and demand in the domestic and foreign exchange markets, and maintain the stable operation of the domestic and foreign exchange markets.What you need to see is that this round of RMB depreciation is mainly triggered by the sharp upward trend of the US dollar index . The three major RMB exchange rate indexes are still stable, and the RMB has not depreciated in a comprehensive manner. Data shows that the US dollar has appreciated 14.6% this year. Against the backdrop of the appreciation of the US dollar, other reserve currencies in the SDR basket have depreciated significantly against the US dollar. From January to August, the euro depreciated 12%, the pound depreciated 14%, the yen depreciated 17%, and the RMB depreciated 8%. Compared with other non-US dollar currencies, the RMB depreciates relatively small, and in the SDR basket, the RMB appreciates against non-US dollar currencies in addition to depreciating against the US dollar.
my country implements a floating exchange rate system based on market supply and demand, regulated by reference to a basket of currencies, and managed by . When the RMB exchange rate fluctuates rapidly continuously, regulatory authorities will promptly adopt appropriate policy tools and macro-prudential tools to help stabilize market expectations and confidence. More importantly, this sends a clear policy signal to market participants who unilaterally bet on the rise and fall of the RMB, indicating that the monetary authorities have rich experience and policy tools and are able to take corresponding measures to maintain the basic stability of the RMB exchange rate.
From the perspective of future development trends, my country has the confidence and conditions to continue to maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. Short-term fluctuations in the RMB exchange rate will not change the pattern of stable operation. The fundamental factor that determines the trend of exchange rate is its own macro fundamentals and market foundation. At present, China's economy is resilient, the long-term positive development trend has not changed, the balance of payments structure is stable, the current account maintains a reasonable surplus in scale, and RMB assets have long-term investment value, which will provide support for the basic stability of the RMB exchange rate.
In addition, since the exchange rate reform of , the degree of marketization of my country's exchange rate has been significantly improved, and the resilience of the foreign exchange market has been continuously enhanced. Market entities have increased their adaptability and tolerance for the rise and fall of the RMB exchange rate and two-way fluctuations. The maturity of the foreign exchange market has been continuously improved, and my country has the foundation and conditions to adapt to external policy adjustments. In the future, the RMB exchange rate will still show a two-way fluctuation pattern and will continue to remain basically stable at a reasonable equilibrium level.
Jin Guanping
(Economic Daily)
