Financial News on September 28th, the onshore RMB fell below the 7.2 mark against the US dollar and is now at 7.2005, falling more than 260 points in the day.
Offshore RMB fell below the 7.2 mark against the US dollar, falling nearly 300 points in the day. The RMB mid-price announced earlier showed that the RMB mid-price against the US dollar was 7.1107, down 385 points; the mid-price on the previous trading day was 7.0722, the official closing price on the previous trading day was 7.1580, and the closing price on the previous day was 7.1800.
The effect of stabilizing the exchange rate of in the short term may appear. There is no need to worry too much about the depreciation of the RMB
Dongwu Securities believes that in the context of the depreciation of the RMB, this operation releases a signal to stabilize the exchange rate, which will help stabilize the expectations of the foreign exchange market. Against the backdrop of the Fed's interest rate hike this year and the weak domestic economic recovery, the RMB exchange rate against the US dollar has continued to depreciate rapidly since August 11, with the mid-price depreciation from 6.73 on August 11 to 7.02 on September 26, a depreciation of 29.74bp, a depreciation of 4.42%. The operation of raising the foreign exchange risk reserve ratio for forward foreign exchange sales business this time is consistent with the previous measures to lower the foreign exchange deposit reserve ratio, and is also aimed at stabilizing foreign exchange market expectations and stabilizing the RMB exchange rate level. Forward foreign exchange sales business is an exchange rate hedging tool provided by banks to enterprises, where enterprises purchase foreign exchange in a forward manner while banks need to purchase foreign exchange in a spot; the adjustment of the foreign exchange risk reserve ratio will directly affect the bank's cost side and then transmit it to enterprises. Specifically: after the foreign exchange risk reserve ratio is raised, banks need to hand over 20% of the forward foreign exchange sales contract amount last month to central bank , and the central bank will return the bank in full after one year. During this period, banks will face higher foreign exchange risks, so the quotations for enterprises will be increased accordingly. The company's forward foreign exchange demand will be suppressed, thereby reducing the bank's spot foreign exchange purchase demand to promote the balance of supply and demand in the foreign exchange market and curb the expectations of RMB depreciation.
Review of previous events of lowering the foreign exchange risk reserve ratio of forward foreign exchange sales business, and the role of stabilizing the exchange rate in the short term is revealed. On August 31, 2015, the central bank included forward foreign exchange sales into the macro-prudential management framework, and collected foreign exchange risk reserves for financial institutions that carried out forward foreign exchange sales on behalf of customers. The reserve ratio was set at 20%, which was the first time that foreign exchange risk reserves were proposed; since then, the central bank announced operations of lowering, increasing and lowering by 20 basis points in September 2017, August 2018 and October 2020 respectively. Overall, the proposal/upgrade of the reserve ratio was both in the period of RMB depreciation, and the downgrade occurred during the period of RMB appreciation; among them, within 1-2 months after the announcement of the reserve ratio was proposed/upgrade, the RMB exchange rate trend was generally stable, and then continued the previous depreciation trend; the forward foreign exchange sales contract amount fell significantly, and the forward foreign exchange sales contract amount in September 2015 decreased by 42.87% and 77.65% month-on-month to US$17.634 billion, and the forward foreign exchange sales contract amount in September 2018 decreased by 61.13% and 46.15% month-on-month to US$10.822 billion; from the perspective of spot inquiry volume, the average spot inquiry volume in September 2015 decreased by 39.22% month-on-month to US$23.245 billion, while in September 2018 both increased by 46.97% and 4.99% respectively.
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