(Finance World) How does the RMB go under the attack of "US dollar shortage"?
China News Agency, Beijing, March 20th (Xia Bin) Global financial market turbulence is extending from the stock market to the foreign exchange market: the rise of the US dollar index has caused the worrying "dollar shortage" of the market, and non-US currencies including the RMB Under pressure.
Since March 10, the US dollar index has continued to rise. In the three days from 18 to 20, it has broken through four integer points of 100, 101, 102, and 103, setting the highest value in more than three years.
Against this background, the renminbi has depreciated accordingly, and the spot exchange rates of onshore and offshore renminbi against the US dollar fell below 7.1 at one time, and the latter even reached the lowest level of 7.1652 during the year.
Non-US currencies have also fallen due to the sharp rise in the US dollar index. The exchange rates of New Zealand dollar, Australian dollar, and British pound against the US dollar have all reached their lowest values in more than 10 years. The Indian rupee, South African rand, and Mexican peso have all hit record lows against the US dollar.
The People's Bank of China announced on the 20th that on March 26, it will tender the issuance of the third phase of 2020 central bank bills through the Hong Kong Monetary Authority's Debt Instrument Central Settlement System (CMU) bond bidding platform, with an issuance volume of 10 billion yuan.
From the current point of view, the momentum of the US dollar index has eased somewhat, and has slightly eased, while the onshore and offshore RMB exchange rate against the US dollar has increased by hundreds of basis points. As of 20:00 on the 20th, the three reported 102.02, 7.0771 and 7.0975 respectively.
What's driving the dollar's surge? The analyst of CITIC Securities bluntly stated that the direct reason for the strength of the US dollar index is the tight liquidity of the US dollar, and the poor performance of the euro in the long-term perspective is also the background of the US dollar's strength. At present, the euro continues to show weakness. At the same time, the epidemic of new crown pneumonia in the euro area is the most serious in overseas epidemics. The number of confirmed new crown pneumonia cases in Italy, Spain, Germany, and France has risen rapidly.
At the same time, the superposition of US stocks fell, and the liquidation of high-leverage institutions would bring a chain reaction, making the tighter liquidity of the US dollar more tense, forming a "US dollar shortage."
Cheng Shi, chief economist of ICBC International, said that the volatility of the financial market has risen significantly this year, especially since the risk premium has increased significantly since February, which has triggered a global dollar supply shock. The deleveraging panic caused by high-volatility markets has further triggered the global U.S. dollar funding has dried up, and some large funds investing in safe-haven assets have been forced to sell by redemption pressure. Global financial markets have experienced extreme scenarios where both risk assets and safe-haven assets have fallen.
In his view, the risk of a liquidity shock shifting to a credit crunch is still high. To avoid congestion in the financial system, more radical rescue measures and regulatory adjustments may be needed.
But in fact, the "US dollar shortage" is not without funds, but without confidence. Clearly pointed out that the current excess reserve holdings of US depository institutions are $ 1.58 trillion, and depository institutions still hold a large amount of excess reserve funds. Against this background, the severe shortage of US dollar liquidity may reflect the bank ’s The measurement of risk is insufficient to provide the market with USD liquidity, and it is still more cautious in the process of lending.
Obviously, from the perspective of liquidity support, the relief of liquidity pressure on the US dollar in the later period may require the Fed to launch more liquidity support policies.
How does the RMB go in the future? Wen Bin, chief researcher of China Minsheng Bank, pointed out that relative to the depreciation of the currencies of some emerging market countries against the US dollar, the yuan's performance was relatively stable. The stable performance of the RMB is mainly due to the fact that China's long-term economic fundamentals have not changed. China's epidemic prevention and control has also achieved positive results. With the resumption of work and production in the next stage, China's economic operation is in a reasonable range, which will help the stability of the RMB.
Wen Bin believes that in the medium and long term, short-term fluctuations in China's stock market and international financial markets will not affect the long-term positive trend of China's capital market, and it is expected that the yuan will keep fluctuating at a reasonable and balanced level against the US dollar. (Finish)