Intraday, the dollar index strengthened again, and the RMB exchange rate depreciated sharply. The offshore RMB exchange rate fell below 7.26 for a time, and the intraday depreciation rate exceeded 1.2%. The sharp depreciation of the RMB caused foreign capital to sell A shares , and northbound funds sold a net sale of 3.84 billion yuan throughout the day. A-shares also fell sharply, with the ChiNext Index falling by 2.57%.
We Central Bank lowered the reserve ratio of financial institutions foreign exchange deposit by 2 percentage points on September 15, and raised the reserve ratio of foreign exchange risk for forward foreign exchange sales business from 0 to 20% on September 26, but neither of these measures prevented the RMB from falling below 7.2. To be honest, if the RMB continues to depreciate here, the market's expected opportunity for the RMB to depreciate will increase, resulting in a vicious cycle and suppress the sentiment in the A-share market.
Today, the central bank took action again. According to the central bank website, on September 27, 2022, the National Foreign Exchange Market Self-Discipline Mechanism Video Conference was held. The meeting analyzed the recent operation of the foreign exchange market and deployed relevant work to strengthen self-discipline management. People's Bank of China Deputy Governor and Chairman of China Foreign Exchange Market Steering Committee (CFXC) Liu Guoqiang attended and delivered a speech.
meeting pointed out that since this year, the RMB exchange rate has remained basically stable at a reasonable equilibrium level. CFETS RMB exchange rate index is basically the same as at the end of 2021. The RMB exchange rate against the US dollar depreciated, but the depreciation was only half of the appreciation of the US dollar during the same period; the RMB appreciated significantly against the euro, pound and yen, and is one of the few strong currencies in the world at present.
meeting requires that member units of the self-discipline mechanism should consciously maintain the basic stability of the foreign exchange market and resolutely curb the ups and downs of exchange rates. Quotation banks should effectively maintain the authority of RMB exchange rate intermediate price ; banks themselves should reasonably carry out self-operated transactions based on the principle of risk neutral to provide real liquidity to the market; member units should further strengthen publicity and guidance on risk neutrality of enterprises and financial institutions, and further improve the service level of helping enterprises avoid risks; relevant departments should strengthen supervision, management and monitoring and analysis, strengthen expectation management , and curb speculation. After the press release of
, the depreciation of the offshore RMB exchange rate has eased, and it has now returned to 7.23. The last time I called out like this was May 13, and the RMB exchange rate did stabilize later. In fact, the decision-making power of the RMB exchange rate is in the hands of the central bank. The exchange rate has been depreciating before, which means that it has not yet touched the bottom line of the central bank. However, the measures proposed at this meeting today are obviously stronger than the previous two times, and the RMB exchange rate is expected to stabilize around 7.2.
