On December 30, the China Foreign Exchange Trading Center made a major official announcement that the weight of the CFETS RMB exchange rate index currency basket will be adjusted. At the same time, the central bank and the foreign exchange bureau also said that the inter-bank RMB foreign exchange market trading hours will be extended again.
Under the double benefits, RMB exchange rate has risen in the short term.
Wind data shows that as of 18:58 on December 30, the onshore RMB exchange rate against the US dollar was reported at 6.9035 yuan, an increase of 674 basis points from the previous closing price of and , and the highest intraday price was 6.9000 yuan. The exchange rate of offshore RMB against the US dollar was reported at 6.9216 yuan, an increase of 514 basis points from the previous closing price, with an intraday high of 6.9185 yuan.
Image source: Wind
CFETS RMB exchange rate index
The weight of the currency basket will be adjusted
The China Foreign Exchange Trading Center (hereinafter referred to as the "Trading Center") issued an announcement on December 30 on adjusting the weight of the currency basket of the CFETS RMB exchange rate index and the SDR currency basket RMB exchange rate index.
announced that in order to further enhance the representativeness of the currency basket of the RMB exchange rate index, the trading center plans to adjust the currency basket weights of the CFETS RMB exchange rate index and the SDR currency basket RMB exchange rate index in accordance with the "CFETS RMB exchange rate index currency basket adjustment rules". The new version of the index will take effect from January 1, 2023.
According to reports, the currency basket weight of the CFETS RMB exchange rate index is calculated using the trade weight method that considers re-export trade factors. The current version of the index uses 2020 trade data. In order to further enhance the representativeness of the index, the new version of the index uses 2021 trade data as the weight for adjustment. After historical retrospection and calculation, the operating trends of the new version and the current version of the CFETS RMB exchange rate index are basically consistent.
Image source: China Foreign Exchange Trading Center
"In the new version of the CFETS currency basket, the weights of major currencies such as the US dollar, euro, yen, and pound sterling have all been reduced, and the currency weights of most emerging economies have been adjusted accordingly." Cinda Securities chief macro analyst Xie Yunliang said.
In addition, the International Monetary Fund (IMF) adjusted the SDR currency basket weight in August 2022, and the trading center adjusted the currency basket weight of the SDR currency basket RMB exchange rate index accordingly.
Image source: China Foreign Exchange Trading Center
The trading hours are extended to 3:00 Beijing time the next day
The interbank RMB foreign exchange market trading hours are extended again.
The People's Bank of China and the State Administration of Foreign Exchange issued an announcement on December 30 that starting from January 3, 2023, the trading hours of the inter-bank RMB foreign exchange market will be extended to 3:00 Beijing time the next day, and the application time of market management systems such as RMB exchange rate central parity and floating range, market makers quotations will be extended accordingly.
The release times of the central parity rate of the RMB exchange rate announced by the China Foreign Exchange Trading Center at 9:15 Beijing time and the spot closing price of the RMB against the US dollar at 16:30 Beijing time remain unchanged.
Image source: People's Bank of China website
The People's Bank of China and the State Administration of Foreign Exchange stated that this will help expand the depth and breadth of the domestic foreign exchange market, promote the coordinated development of the onshore and offshore foreign exchange markets, provide more convenience to global investors, and further enhance the attractiveness of RMB assets.
The People's Bank of China and the State Administration of Foreign Exchange stated that they will continue to promote high-level opening up to the outside world, further deepen the construction of the foreign exchange market, and strive to build an open, diversified, functional, and orderly competitive foreign exchange market to better serve the high-quality development of the real economy.
Industry insiders said that this move of will cover more overseas trading hours, avoid excessive price differences in domestic and foreign foreign exchange markets, and make it more convenient for global investors to participate.
Editor: Zheng Yashuo
