On September 28, the RMB exchange rate shook sharply. As of press time, the onshore RMB fell below the 7.2 mark against the US dollar, at 7.2253; the offshore RMB fell below the 7.23 mark against the US dollar, and fell about 500 points in the day.
Technically, this is the lower limit of RMB exchange rate fluctuations against the US dollar in the past fifteen years. Except for the infinite approach during the 2019 trade war, it did not break through 7.2 at other times.
At the same time, the three major indexes of A shares fell by more than 1%, among which the ChiNext Index fell by nearly 2%. As of now, northbound funds have sold more than 5 billion yuan, of which Shanghai Stock Connect has sold 2.285 billion yuan and Shenzhen Stock Connect has sold 2.806 billion yuan.
Since the Fed started interest rate hike in in March, the intensity and speed of the Fed rate hike in have gradually accelerated and increased. Affected by this, the index rose sharply, and the US dollar index rose from 95.647 at the beginning of the year to a high of 114.685 on September 28, setting a new high in nearly 20 years, with an annual highest increase of nearly 20%.
has increased and decreased, and non-US currencies have suffered a sharp drop this year. Among major economies around the world, calculated at the indirect exchange rate:
pound fell 21.26% against the US dollar, and may witness a new history over the past 200 years - approaching or even falling below parity.
yen fell 20.44% against the US dollar.
Euro fell 15.93% against the US dollar, which has fallen below parity.
Onshore RMB also fell 11.99% against the US dollar.
Relatively speaking, the RMB is more resilient than other non-US currencies and depreciates against the US dollar, but mainly appreciates against other currencies.
The "2022 RMB Internationalization Report" just released by the central bank shows that the share of RMB international payment increased to 2.7% in December 2021, and surpassed the yen to become the fourth payment currency in the world , and further increased to 3.2% in January 2022, setting a record high. This also highlights the strength of the RMB.
Against the backdrop of continued US interest rate hikes, global capital has returned to the United States. But it is obvious that capital has not flowed into the stock market, especially US stocks . Judging from the annual K-line, the Dow Jones Industrial Average fell 19.82%, with a maximum drawdown of more than 20%, officially entering the technical bear market , which is second only to 2008 in the past 50 years. The Nasdaq fell even more, exceeding 30%.
The main reason is that interest rate hikes have significantly raised the global risk-free interest rate, resulting in a decrease in the stock market return rate, which has led to a sell-off; secondly, the United States has experienced the worst inflation in 40 years, which is the killer of the stock market, which is also the main reason for the continuous interest rate hikes in the United States. Of course, the bigger reason behind
is the hegemony of the US dollar. According to its own economic cycle, the United States repeatedly switches between "opening the gate and opening the water" and "closing the gate and shutting down the flow". Its real purpose is to loot foreign exchange wealth from various countries and make huge profits during the process of large inflows and outflows of the US dollar. The essence of the exchange rate is the comparison between a country's comprehensive national strength and another country's comprehensive national strength. The strengthening of the US dollar is also related to a series of vertical and horizontal struggles by the United States.
The United States has urged the Russian-Ukrainian war to raise the energy prices in Europe, causing Europe to begin to de-industrialization; the United States has also continued to suppress China, from chips to new energy, and introduced a series of economic policies to curb China, which has now intensified tensions in the Taiwan Strait to crack down on capital's confidence in China.
These practices of the United States are to step on others and further consolidate hegemony in cooperation with the interest rate hike policy. It has to be said that the basis for the United States to achieve these is also related to its system, science and technology, culture, etc.'s attractiveness to talents and funds.
For other non-US currencies, the exchange rate depreciation combined with balance of payments imbalance will lead to a significant shrinkage of foreign exchange reserves in some countries, further weakening their ability to resist external risks, and the risk of a new round of financial crisis and debt crisis will rise sharply.
Specifically, the reason for the depreciation of the RMB against the US dollar is related to the economic situation.
Judging from the GDP data, the US economy showed negative growth in the first and second quarters, but the month-on-month value of the US economy is reported here. According to year-on-year data, the United States grew by 4.2% and 2.9% in the first and second quarters, while the domestic data during the same period were 4.8% and 0.4%.
The GDP gap between China and the United States in the first half of the year was US$3.589 trillion, compared with US$2.849 trillion in the same period last year. Domestic economic development is severely affected by the epidemic, and the economic gap between China and the United States is widening.
In addition to the epidemic, import and export are also one of the important considerations for the exchange rate. Currently, domestic exports are facing great downward pressure. The export growth rate in August fell significantly, falling from 17.8% last month to 7.1%. In addition, Shanghai's overseas manufacturing PMI index has continued to decline. The contraction of demand will further slow down the growth rate of domestic import and export, amplifying the expectations of the depreciation of the RMB.
In addition, China and the United States have diverged from monetary policies. Against the backdrop of the US dollar hikes all the way, in order to stabilize economic development, domestic monetary policy has been in a state of marginal easing. This year, the central bank has issued policies many times, including lowering the reserve requirement ratio, surrendering balance profits, launching a 440 billion re-lending tool, etc. In August, it adjusted the benchmark interest rate , lowering 15BP for LPRs above 5 years. The loose monetary policy has inverted the interest rate gap between China and the United States, triggering expectations of RMB exchange rate depreciation.
According to MondaleImpossible Triangle Theory, the domestic economy is under great downward pressure, and between the exchange rate and real estate, the central bank finally chose the latter.
Currently, the US dollar is approaching its highest level against the RMB in the past 10 years. What tools does the central bank have to deal with exchange rate fluctuations have naturally become one of the most concerned topics in the market.
my country's exchange rate foreign exchange management tools have four main categories:
Exchange rate pricing intervention tools: mainly countercyclical adjustment factors and the use of foreign exchange reserve intervention;
Foreign exchange liquidity adjustment tools: mainly foreign exchange deposit reserves, foreign exchange risk reserves, currency swap transactions, and issuance of offshore central bills;
Cross-border capital flow management: macro-prudential management, capital control, etc.;
oral intervention.
htmlOn September 26, the central bank announced that it had decided to raise the foreign exchange risk reserve ratio for forward foreign exchange sales business to 20% from the 28th. This is another adjustment since the central bank adjusted the foreign exchange risk reserve ratio to 0 in October 2020. Before that, starting from September 15, the central bank lowered the foreign exchange reserve ratio of financial institutions by 2 percentage points, that is, from the current 8% to 6%.Experts said that if the exchange rate continues to be under pressure, it is not ruled out that more management tools will be adopted in the future.
For the future of the RMB, Yi Yi, chief macroeconomist of Huatai Securities, believes that , the US dollar may enter the process of "smoothing and raising the top" this winter and next spring, , but with the decline in US growth expectations and the frequency of interest rate hikes by other central banks, the US dollar index may peak and fall. In the short term, the RMB exchange rate may be under pressure; in the medium and long term, the real RMB exchange rate is more resilient.
This article is from Caitongshe
