[ RMB exchange rate is significantly lowered. What are the risks and opportunities?] Faced with the strong rise of the US dollar, the RMB exchange rate has seen a significant pullback for many consecutive days.
htmlOn the 122nd, the mid-price of the RMB exchange rate against the US dollar was significantly lowered by 498 basis points to 6.4596, and has accumulated a total of 700 basis points this week.
htmlOn the 122nd, the onshore RMB exchange rate against the US dollar fell sharply, with the onshore RMB exchange rate at the lowest intraday of 6.4779, RMB exchange rate against the US dollar fell back to the era of 6.4 yuan, and offshore RMB at the lowest was 6.5034. As of 11:30, the onshore RMB exchange rate against the US dollar has been lowered by 1.51% this week, and the offshore RMB exchange rate against the US dollar has been lowered by 1.70%.
Why is the RMB exchange rate pulling back against the US dollar?
Recently, with the further strengthening of the expectation of Federal Reserve rate hike , the dollar index continued to rise after entering April. Driven by the strong US dollar index, major Asian currencies including the Japanese yen, South Korean won, Singapore dollar all fell against the US dollar, and the offshore RMB exchange rate was affected.
Among them, the depreciation of the yen even hit a hot search, and the exchange rate of the yen against the US dollar once fell to about 129, a new low in about 20 years. In more than a month since the beginning of March, the yen has depreciated by more than 10% relative to the US dollar.
The strengthening of the US dollar will naturally affect the exchange rate pullback of other non-US currencies.
In addition, the interest rate spread of 10-year Sino-US Treasury bonds has been inverted for the first time since 2010. Analysts believe that as the interest rate gap between China and the United States narrows, fluctuations in the international financial market will put pressure on the RMB to depreciate.
Director of China Foreign Exchange Investment Research Institute Tan Yaling told China News Service that since the inversion of the 10-year treasury bond yield between the US dollar and the RMB has been shown, the tendency of the RMB to depreciate gradually strengthened. The future layout changes, capital transfer benefits, and future expectations of interest rates caused by the comparison of the differences in the correlation with the US dollar may be the main reasons for short-term depreciation.
In an interview with China Securities Journal, an institutional person analyzed that in the context of the spread of the epidemic in many places in the country, disturbances in the supply chain, and the Fed The official opening of the interest rate hike cycle, the RMB exchange rate may further release the pressure of depreciation.
"Current account surplus is a key factor supporting the stability of the RMB exchange rate in the previous period. If the export share falls under the differences in epidemic prevention and control strategies at home and abroad, the RMB exchange rate may depreciate." said Song Xuetao, chief fixed income analyst at Tianfeng Securities .
In addition, the pace of interest rate hikes in the Federal Reserve has accelerated, the US dollar index strengthened, and the 10-year US bond yields have risen, putting the RMB exchange rate under short-term pressure. CICC's research report pointed out that with the rapid narrowing or even inverting interest rate gap between China and the United States, the pressure on short-term cross-border securities investment outflow has increased.
What is the future trend of the RMB exchange rate?
As of 11:30 on the 22nd, the 10-year US Treasury yield was 2.95%, with a maximum of 2.97%, approaching 3%; the US dollar index has exceeded 100 during the trading session for 11 consecutive trading days. Industry insiders predict that in the medium and long term, the probability of the RMB exchange rate continuing to depreciate unilaterally is not high, and the elasticity of the RMB exchange rate will be further increased.
China Financial Research Report pointed out that from the perspective of the bilateral exchange rate of the US dollar to the RMB, the average price level since the "8·11 exchange rate reform " in 2015 has been before 6.65-6.70. The current exchange rate level of the RMB is still on the stronger side, and the possibility of a long-term return to the center will further increase.
In the long run, China's economic fundamentals support the valuation center of the RMB exchange rate to remain basically stable at a reasonable and balanced level for a long time. This means that the RMB has neither the basis for long-term depreciation nor the basis for long-term appreciation. Against the backdrop of increased short-term elasticity and intensified two-way fluctuations, the RMB exchange rate will still have the logic of mean regression in the medium and long term.
CITIC Securities analyst Mingming pointed out that overall, the supply chain disturbance caused by the impact of the epidemic and the strong trend of the US dollar will put some pressure on the RMB in the short term, and the RMB elasticity will increase, but basic accounts (recurring accounts + direct investment) still have support for the RMB, so there is no need to worry too much about the depreciation of the RMB.
Tan Yaling expects that the expansion of the RMB volatility range, the clear trend and the phased detour will be the main characteristics of this year. Compared with the long-term economic prospects, the stability of the political structure and the openness and freedom of the market, the long-term charm of the RMB has not changed.
China Minsheng Bank chief researcher Wen Bin told China News Service that the overall RMB exchange rate is expected to fluctuate in two directions at a reasonable equilibrium level. Therefore, for Chinese import and export foreign trade companies, we should not raise or depreciate the RMB, but should do a good job in managing the exchange rate risk to ensure the normal production and operation of the enterprise.
On the other hand, the US dollar index also has the possibility of a fall. CICC's research report pointed out that if the U.S. inflation slows down in the future and the market's pricing of the Federal Reserve's expectation of interest rate hikes is completed, there is a possibility of a shift in the US dollar index.
