The recent exchange rate performance is strong, and the offshore RMB once broke "7"-

　　RMB is getting more and more "scented"

　　Economic Daily · China Economic Net reporter Yao Jin

　　Recently, the RMB exchange rate has been strong, and offshore RMB once rose above the "7" mark. Experts said that the fundamentals of the domestic economy continued to improve, the continued inflow of foreign capital and the promotion of the weak dollar were important factors supporting the strengthening of the RMB exchange rate. The expectation of RMB appreciation has increased the confidence of foreign investors in increasing their holdings of RMB assets. Industry insiders predict that the RMB exchange rate will remain stable in the second half of the year.

　　Recently, the RMB exchange rate has been strong, and offshore RMB once rose above the "7" mark. On July 7, the central parity of the RMB against the US dollar increased sharply by 353 basis points to 7.0310 from the previous trading day, the largest appreciation in the past three months. On the 8th, the central parity rate of the RMB against the US dollar was reported at 7.0207, an increase of 103 basis points from the previous trading day, and rose to its highest since March 17 this year.

　　Experts said that the fundamentals of the domestic economy continued to improve, the continued inflow of foreign capital and the promotion of the weak dollar were important factors supporting the strengthening of the RMB exchange rate. The expectation of RMB appreciation has also boosted the confidence of foreign investors in increasing their holdings of RMB assets. In the future, the RMB exchange rate will continue to maintain two-way fluctuations around the equilibrium level.

　　Strong RMB exchange rate

　　Since the beginning of this week, although the central parity rate of the RMB against the US dollar has been lowered on July 6 compared with the previous trading day, more on-the-spot and offshore RMB-to-US dollar exchange rates expected by international investors have increased sharply that day Breaking the 7.05, 7.04 and 7.03 barriers, the offshore RMB rose by more than 500 points throughout the day.

　　On the morning of the 7th, the offshore RMB exchange rate against the US dollar once rose above the "7" mark, a new high since mid-March. The onshore RMB against the US dollar spot exchange rate appreciated by 155 basis points to 7.0034 in early trading, which was also approaching the integer mark. The daily closing price reported at 7.0241, which was also at a high of nearly 3 months.

　　In fact, since last week, the RMB exchange rate has steadily recovered. The onshore renminbi exchange rate has risen by nearly 0.7% for 5 consecutive trading days, out of the consolidation trend in the first half of the year. In the first half of the year, the renminbi exchange rate exhibited three stages of "up-down-up": At the beginning of January, the exchange rate of RMB against the US dollar rose from 6.9631 to 6.8585, an appreciation of 1.50%; from January 20 to March 23, the exchange rate of RMB 6.8613 dropped to 7.1187, depreciating by 3.75%, and then to May 28, the depreciation range was further expanded to 4.35%; in June, the RMB exchange rate began to stabilize, rising by 1.0%.

　　"7" was once regarded as an important psychological barrier for the RMB exchange rate. However, in the view of Zhou Maohua, an analyst at the Everbright Bank's financial market department, from the market performance since the renminbi broke through the "7", investors have gradually downplayed its significance. In other words, after the RMB exchange rate breaks through "7", there will not be a sustained strong trend, and conversely, there will be no irrational devaluation. This shows that the market-oriented reform of the RMB has continuously made new progress, the exchange rate flexibility has been significantly enhanced, and the foreign exchange market is more sensitive and effective in pricing information such as fundamentals, supply and demand, and long and short information.

　　CCB Investment Consulting Analyst Wang Quanyue believes that the offshore exchange rate broke "7" and drove the onshore exchange rate higher, alleviating the pressure of the RMB's external depreciation in the short term. Although this year's "Government Work Report" does not mention "improving the RMB exchange rate formation mechanism", the market still needs to adapt to the normalization of the two-way fluctuation of the RMB exchange rate.

　　RMB assets are favored

　　Corresponding to the appreciation of the renminbi, A-shares have strengthened strongly and northbound funds have continued to flow in. On July 6-7, the onshore RMB rebounded more than 400 points, and the Shanghai Composite Index rose nearly 200 points. At the same time, foreign capital added to A shares. On the 6th, northbound funds net purchased more than 10 billion yuan for three consecutive trading days, and the net purchase of 13.653 billion yuan throughout the day led to a surge in A-shares and a sharp rise in the RMB exchange rate. On the 7th, northbound funds flowed for the fourth consecutive trading day. The net inflows since July totaled 53.805 billion yuan, more than double the same period in June.

　　In addition to the stock market, foreign capital has also accelerated the allocation of RMB bonds. Bond Connect data shows that as of the end of June, foreign institutions had accumulated 2.51 trillion yuan of Chinese bonds. The net increase in holdings in the first half of the year was about 322.4 billion yuan, 1.4 times the same period last year. The current balance of the Chinese bond market is 108 trillion yuan, ranking second in the world.

　　The expectation of RMB appreciation has also boosted the confidence of foreign investors in increasing their holdings of RMB assets. Institutions believe that foreign investment will further increase the allocation of A shares. CITIC Securities issued a comment saying that the recent large inflow of northbound funds mainly came from transactional funds. Comparing the historical inflow of transactional funds, it is expected that there will still be room for increment in transactional funds in this round.

　　Yan Xiang, Chief Strategy Analyst of Guosen Securities, said that the current overseas new coronary pneumonia epidemic continues to spread, while the domestic epidemic has been effectively controlled and the domestic economic recovery continues. At present, the overall valuation level of Chinese listed companies is relatively low, which still has a high investment value relative to China's economic development potential, and the proportion of foreign investment in the A-share market is still low. Foreign capital will still further increase the allocation of the A-share market.

　　The team of Chen Guo of Anxin Securities believes that foreign capital is expected to continue to flow into A shares in the second half of the year. The Chinese economy is leading the global recovery, the allocation value is rising and the weak dollar is expected to be the main reason.

　　Huatai Securities Zhang Jiqiang's team believes that the adjustment of the domestic bond market has further widened the spread between China and the United States, and the attractiveness of national debt has increased. Although the epidemic is gradually shifting to Latin America and other regions, and the demand for foreign hedging has declined, the interest rate differential between China and the United States is still at a historical high, the US dollar may weaken, and the interest rate of Chinese government bonds is still attractive worldwide.

　　Fundamentals support exchange rate stability

　　Regarding the trend of the RMB exchange rate in the second half of the year, people in the industry generally believe that it will remain basically stable.

　　Cao Yuanyuan, technical director of the research and development department of Dongfang Jincheng, said that the offshore RMB exchange rate against the US dollar once broke through the "7" mark. The main supporting factors include the decline in the utilization rate of the central bank's currency swap quota, the Fed's repurchase balance plummeted, and the global " The "dollar shortage" has gradually eased, and the superimposed market has revised down the US economic expectations during the year. Recently, the US dollar index has dropped to around 96 points. At the same time, the high interest rate spread between China and the United States, the low valuation of the Chinese stock market, and the accelerated expansion of the capital market to facilitate the entry of foreign capital have led to strong demand for RMB purchases recently.

　　"The strength of the renminbi is mainly driven by the continued inflow of foreign capital and the weak dollar. Recently, the A-share market has pulled up, pushing up the buying of the renminbi. At the same time, the weak volatility of the US dollar index has also helped strengthen the renminbi." Zhou Maohua said.

　　The chief economist of Founder Securities believes that the fluctuations of the RMB exchange rate in the previous period were mainly caused by factors such as the balance of payments and the sharp rise in the US dollar index. During the epidemic prevention and control period, the balance of payments pressure was relatively large, and the sharp decline in exports led to a current account deficit in the first quarter. At the same time, under the influence of panic, investors scrambled to sell risky assets in exchange for dollar liquidity. Against the backdrop of weakening the impact of the domestic epidemic and stabilizing the balance of payments, the RMB exchange rate will remain stable in the future.

　　It is worth noting that in addition to foreign capital inflows and the weakening of the US dollar, my country's economic fundamentals continue to improve, which is also an important factor supporting the future strength of the RMB exchange rate. "China's manufacturing PMI expansion accelerated in June, and the macroeconomic recovery rate may exceed market expectations. Fundamental advantages also support the strengthening of the RMB exchange rate." Cao Yuanyuan said that China's economic fundamentals are expected to continue to improve, which will consolidate the foundation for the stable operation of the RMB exchange rate.

　　Bank of China chief researcher Zong Liang believes that under the circumstance of relatively low global economic conditions and unstable global capital and foreign trade, China's fiscal and monetary policies are working together, and a steady increase in the RMB exchange rate is a high probability event.

　　"In the short term, the onshore RMB exchange rate is still expected to maintain a strong pattern." Zhou Maohua also believes that the RMB exchange rate does not have the basis for a substantial strengthening, and will maintain two-way fluctuations near the equilibrium level in the future, mainly because of the uncertainties in the global economic outlook. High, will inevitably have an impact on the domestic economy, while the global demand for dollar hedging has not disappeared.