Chinanews client, Beijing, September 3 (Reporter Li Jinlei) Those who exchanged RMB for US dollars a few months ago may have regretted their intestines these days.

　　Because the renminbi continues to appreciate, while the U.S. dollar is depreciating.

　　On May 29, the central parity of the RMB against the US dollar was 7.1316, and on September 2 it was 6.8376.

From 7.1316 to 6.8376, if you exchange for 50,000 US dollars, you would need 356,580 yuan at that time, and today it only needs 341,880 yuan, which can save 14,700 yuan.

It can be seen how much the RMB has risen recently.

RMB and USD data map.

Photo by Chinanews reporter Li Jinlei

　　Data show that the central parity of the RMB against the US dollar has risen to a high in more than a year.

　　The People's Bank of China authorized the China Foreign Exchange Trade System to announce that on September 2, 2020, the central parity of the RMB exchange rate in the inter-bank foreign exchange market was: 1 U.S. dollar to RMB 6.8376, an increase of 122 basis points from the previous trading day.

The central parity of the RMB against the US dollar has risen for 7 consecutive days, setting a new high since May 14, 2019 (6.8365).

　　The offshore and onshore renminbi exchange rates against the U.S. dollar are also "rising."

On September 1, the offshore and onshore renminbi both rose above the 6.82 mark. Among them, the offshore renminbi once set a new high since May 2019 to 6.8134, rising more than 400 points in the day.

　　For a time, why the RMB exchange rate strengthened and whether the trend of RMB appreciation can continue has become a topic of concern and heated discussion in the market.

　　In the opinion of the interviewed experts, there are three main reasons for the strengthening of the renminbi:

First, the US dollar index weakened.

　　Generally speaking, the strength of the US dollar index has an inverse relationship with non-US dollar currencies such as the RMB. If you are strong, you will be weak, and if you are weak, you will be strong.

　　Data show that since late May this year, the US dollar index has started a downward trend, and it has recently fallen below 92, setting a new low since early May 2018.

　　Wen Bin, chief researcher of China Minsheng Bank, told a reporter from Chinanews.com that due to the Fed's huge amount of currency, the US dollar index continued to fall under market expectations of the depreciation of the US dollar, and non-US currencies including the renminbi showed an appreciation trend.

　　According to the chief analyst of CITIC Securities' fixed income, the Fed has launched an unprecedented large-scale monetary easing policy since the epidemic. At the same time, the Fed has adjusted its monetary policy framework and introduced an "average inflation system."

In July, US bond yields, which have been depressed, further declined, and the US dollar index basically declined significantly from the second stage after the end of the "dollar shortage" that started in late July.

A map of currency packages.

Second, the fundamentals of China's economy have continued to improve.

　　"China's epidemic prevention and control has achieved remarkable results, and China's economy has continued to recover and improve. The main economic indicators are gradually improving. In the second quarter, China was the only major economy that achieved positive growth. This is a strong support for the renminbi." Wen Bin said.

　　Data from the National Bureau of Statistics showed that China's economy continued to recover steadily in July. Among them, the growth rate of retail sales in July turned from negative to positive for the first time in the year, and the growth rate of exports reached double digits.

　　The newly announced August manufacturing purchasing managers index, non-manufacturing business activity index and comprehensive PMI output index have all remained above the threshold for 6 consecutive months.

　　Mingming also believes that the strengthening of the RMB exchange rate is also a reflection of the fundamentals of China's economy.

Judging from the performance of the manufacturing PMI index, after experiencing a cliff-like decline in February, China’s economic prosperity has continued to recover. The World Bank and the International Monetary Organization both predict that China will be one of the few countries that can achieve positive economic growth this year. The performance of domestic fundamentals after the epidemic has provided important support to the RMB exchange rate.

Third, RMB assets are popular.

　　Wen Bin pointed out that China is continuing to promote the opening of the financial market. International investors are optimistic about China's economic prospects and RMB assets. The continuous flow of foreign capital into China's capital market is conducive to the appreciation of the RMB.

　　According to data recently released by the State Administration of Foreign Exchange, in July, the net increase in foreign holdings of domestically listed stocks and bonds increased by 1.4 times year-on-year, and the balance of foreign exchange reserves increased positively for four consecutive months.

　　Obviously, in the context of the easing of global central banks, the Central Bank of China maintained a cautious and determined monetary policy during the epidemic, the Sino-US interest rate gap remained high, and the attractiveness of RMB assets has increased significantly, which has also promoted the strengthening of the RMB exchange rate.

　　As of August 28, the spread between the representative 10-year Treasury bonds between China and the United States has exceeded 230 basis points. The widening spread between China and the United States and the higher yields of RMB assets attract continuous inflows of foreign capital, which has played a role in boosting the appreciation of the RMB exchange rate. .

RMB data map.

Photo by Ai Qinglong

What is the future trend of the RMB exchange rate?

　　Generally speaking, appreciation is conducive to imports, overseas travel consumption and studying abroad, but it will have an adverse effect on exports.

Therefore, the outside world is also very concerned about the trend of the RMB exchange rate.

　　Regarding the trend of the RMB exchange rate in the next stage, Wen Bin analyzed that in the short term, because of the continuous recovery of China's economy, international investors are optimistic about the capital market and the continued inflow of foreign capital. These factors are expected to further promote the appreciation of the RMB.

However, in the medium and long term, with the further marketization of the RMB formation mechanism, the RMB exchange rate will maintain two-way fluctuations at a reasonable and equilibrium level.

　　Obviously, the strengthening of the RMB exchange rate may continue. However, considering the subsequent risks, including global risk aversion, Sino-US relations, and asymmetric capital controls, the RMB exchange rate may show a slower slope of appreciation. The RMB exchange rate range may be 6.7~6.8.

At the same time, it should be noted that the continued appreciation of the exchange rate may have a certain impact on China's exports and manufacturing.

　　The Central Bank's "China Monetary Policy Implementation Report for the Second Quarter of 2020" released in August proposed to deepen the reform of exchange rate marketization, improve a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies, and maintain RMB exchange rate flexibility , To play the role of exchange rate adjustment macroeconomic and automatic stabilizer of international payments.

Stabilize market expectations and maintain the basic stability of the RMB exchange rate at a reasonable and equilibrium level.

(Finish)