Financial News September 5th As the dollar index continues to strengthen, emerging market currencies, yen and euros are suffering from "suppression".
This morning, the US dollar index opened high and closed high, setting a new high of more than 20 years to 110.03. Meanwhile, the euro fell below its previous low of 0.9898 against the US dollar, continuing to hit a new low since December 2002.
Offshore RMB against the US dollar also fell below the 6.95 mark at noon today, reaching a low of 6.9547, continuing to hit a new low since August 17, 2020, and once fell by more than 300 basis points during the day.
Since August 15, the RMB exchange rate has experienced the second round of sharp depreciation this year. In the past three months, it has rapidly declined from 6.7 to 6.95, just one step away from "breaking 7", which has attracted high attention from the market.
At 17:00 today, the central bank announced that in order to improve the ability of financial institutions to use foreign exchange funds, the People's Bank of China decided to lower the reserve ratio of foreign exchange deposits by 2 percentage points from September 15, 2022, that is, the reserve ratio of foreign exchange deposits was lowered from the current 8% to 6%.
Affected by this news, the offshore RMB rose nearly 200 basis points against the US dollar in the short term, and is now at 6.39392, with the intraday decline falling back to 0.3%. Onshore RMB fell by more than 130 basis points against the US dollar and is now at 6.9310.
Central Bank: RMB has not experienced a comprehensive depreciation
This afternoon, People's Bank of China Deputy Governor Liu Guoqiang attended the regular briefing on the State Council's policies and said that at present, China's foreign exchange market is operating normally, cross-border capital flow is moving in an orderly manner, and although the spillover effect of US monetary policy has been affected, the impact is controllable.
Liu Guoqiang pointed out that this is due to the fact that the long-term positive fundamentals of China's economy have not changed, the economic resilience is relatively strong, and I am very confident that the economy has entered an upward stage again. In addition, thanks to China's exchange rate mechanism, our exchange rate system reform based on market supply and demand has been deepened, macro-prudent management has been continuously improved, and the elasticity of exchange rate has also been significantly enhanced, so that the function of regulating the macro economy and balance of payments has been better played.
Liu Guoqiang said that the long-term trend of RMB is clear, and the world's recognition of RMB will continue to increase in the future, which is a long-term trend. , but this should be the case in the short term. Two-way fluctuations are a normal state. There are two-way fluctuations and there will be no " unilateral market ", but the exchange rate point is not accurate, so don't bet on a certain point. We like to hear reasonable balance and basic stability, and we also have the strength to support it. I don’t think anything will happen, and I don’t allow it to happen.
Liu Guoqiang also said that RMB did not experience a comprehensive depreciation. In the SDR currency basket, a basic situation is that the US dollar has appreciated and the RMB has appreciated, but the appreciation of the US dollar is greater than that of the RMB. The US dollar has appreciated 14.6% this year. Against the backdrop of the appreciation of the US dollar, other reserve currencies in the SDR ( Special Drawing Rights ) basket have depreciated significantly against the US dollar, and the RMB has also depreciated by about 8%. However, compared with other non-US dollar currencies, the depreciation is the smallest.
Sun Binbin, deputy director of Tianfeng Securities Research Institute and chief fixed income analyst, said that the strengthening of the US dollar has driven the depreciation of currencies in major economies, and the RMB exchange rate has also adjusted. However, compared with the appreciation of the US dollar and the depreciation of currencies in other major economies, the depreciation of the RMB exchange rate of the RMB is not high, and the overall situation remains stable.
Sun Binbin believes that if the US dollar continues to strengthen in the future, before the downward pressure on the domestic economy is lifted, the RMB exchange rate will still have expectations and pressure to depreciate, and it is not ruled out that the RMB exchange rate will break 7. From an international comparison, as the yen fell below the 140 key point recently, the possibility of the subsequent RMB exchange rate breaking 7 has also increased accordingly.
$ strong may not have ended ! Follow Federal 9 interest rate resolution
Last week, the United States' non-agricultural variance was not as good as the Fed's expectation of 275 basis points hike in September. However, Russia's suspension of Nord Stream No. 1 made Europe walk on thin ice, and the euro turned down and gave the US dollar a chance to stabilize.
Foreign exchange institution Industry Investment said that many Fed officials maintained the hawkish tone in their speeches last week, following up on the previous position of Federal Reserve Chairman Powell at the Jackson Hall Global Central Bank Annual Meeting, and will fight inflation at all costs, with the end of the interest rate likely to reach 3.5-4%, and there will be no interest rate cuts next year. 's current federal funds rate target is 2.25%-2.5%, which means the Fed may have as much as 150 basis points of interest rate hike.
Since 2022, as the epidemic continues, many countries have started a cycle of interest rate hikes to curb high inflation, but the effect is very small. Geographical conflicts and interest rate hikes in many countries have curbed inflation, but the effect is very small, and the market's risk aversion sentiment has worsened. In addition, the Fed has raised interest rates four times this year, two of which reached 75 basis points, which has helped the US dollar rise all the way. Industrial Investment analysts believe that the current upward momentum of the US dollar remains intact and may remain strong before the Federal Reserve's September meeting.
According to CME's "Feder Observation", the probability of the Fed raising interest rates by 50 basis points by September is 44%, and the probability of raising interest rates by 75 basis points has dropped to 56%.
BOC Securities analyst Zhang Xiaojiao pointed out in the research report that the trend of strengthening the US dollar index may not have ended . On the one hand, the European economy, which takes the energy crisis as a breakthrough, still faces the dual test of high inflation and weak growth. The United States' fundamental advantage over Europe will constitute fundamental support for the US dollar exchange rate. On the other hand, the Federal Reserve stated that in order to curb inflation rate hikes, the process of curbing inflation rate hikes will not stop in the short term. Under the expectation of interest rate hikes, the yield of two-year US bond has risen by more than 3.5%, and the 10-year US bond yield has also rebounded to above 3.2%, which will continue to attract international capital to return US dollar assets and support US dollar exchange rate. While the US dollar appreciates, the RMB exchange rate is also facing depreciation pressure. However, compared with Europe, Japan and other emerging market countries, my country still has comparative advantages in economic growth, inflation pressure and policy space. It is expected that the RMB exchange rate will still be mainly fluctuated and will not form a trend of continuous depreciation.
This article comes from the financial world
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