Exchange rate is also known as foreign exchange interest rate, foreign exchange rate or foreign exchange market , which refers to the exchange rate between two currencies, and can also be regarded as the value of a country's currency to another currency.
On August 11, 2015, my country Central Bank announced the adjustment of the RMB exchange rate mid-price to US dollar exchange rate . market makers refer to the previous day interbank foreign exchange market closing exchange rate , and provide a mid-price quotation to China Foreign Exchange Trading Center . This adjustment further marketizes the RMB exchange rate mid-price mechanism of the RMB against the US dollar, and more truly reflects the supply and demand relationship of the current foreign exchange market. Since 811 exchange rate changed to , the RMB has ended its unilateral appreciation, making the RMB exchange rate more market-oriented.
Below we analyze the impact of RMB exchange rate fluctuations on the trend of A shares from historical data, or the relationship between the two.
After nearly 3 months of bottoming out , offshore RMB started a round of depreciation against the US dollar from May 2018 to August 2019 (Part 1 of the blue characters in the figure below), with a depreciation of 13.39%; from September 2019 to May 2020, the exchange rate remained volatile (Part 1 of the blue characters in the figure below), with a depreciation of 12.85%; until June 2020 to February 2022, the RMB began to appreciate significantly (Part 2 of the blue characters in the figure below), with a appreciation of 11.49%; finally from March 2022 to September 2022, the RMB depreciation of 12.85%.
Exchange rate trend chart
From the A-share trend chart, it can be seen that from February 2018 to January 2019 (the blue word 1 part below), the Shanghai Composite Index fell, with a maximum drop of 25.75%; it also experienced a period of fluctuation (blue box part), and from July 2020 to November 2021, the Shanghai Composite Index rose, with a maximum increase of 21.95%; then from January 2022 to September 2022, the Shanghai Composite Index fell, with a maximum drop of 16.91%.
Shanghai Composite Index trend chart
From the comparison of the above historical data, the changes in the offshore RMB exchange rate are basically positively correlated with the A-share trend, with one loss and one prospering. Although there are some time sequences, the overall trend is consistent. Therefore, for stock market investors, the trend of the offshore RMB is undoubtedly an indicator that should be focused on.
Recently, the RMB has depreciated for three consecutive months, and it has broken 7 during the period, breaking the previous high; and market has also closed negative for three consecutive months, and now it has reached 3,000 points, and a new round of defense battle of 3,000 points has begun. The offshore RMB rose sharply for two consecutive days on September 28 and 29, with a single-day increase of more than 1,000 basis points, which greatly curbed the depreciation trend of the RMB. Our Shanghai Composite Index has both surged and fell back to in the past two days, fluctuating and falling, with new lows every day, barely holding on to 3,000 points.
If the offshore RMB stabilizes and maintains reasonable fluctuation space in the future, it will undoubtedly be a major benefit to the market. If the appreciation trend comes out, the market will most likely have a rebound or even a reversal.
