Chinanews client, Beijing, October 23 (reporter Li Jinlei)
The appreciation of the renminbi does not seem to mean to stop.
RMB exchange rate hits a new high in more than two years
On October 22, the China Foreign Exchange Trade System announced that the central parity of the RMB against the US dollar was 6.6556, an increase of 225 basis points from the previous trading day. It continued to rise for 6 consecutive trading days, setting a record for more than two years since July 11, 2018. new highs.
Chart of the central parity rate of the RMB against the US dollar.
The onshore and offshore RMB exchange rates against the US dollar both hit new highs in more than two years.
On October 22, the onshore renminbi against the US dollar rose to 6.64, and the offshore RMB to the US dollar rose to 6.63.
Tan Yaling, president and chief economist of the China Institute of Foreign Exchange Investment, told a reporter from Chinanews.com that this round of appreciation of the renminbi started in June and has not yet ended, and the cycle is considered relatively long.
From this perspective, the entire international economic and trade relationship, including geopolitics, is still highly targeted and designed between the foreign exchange sector and currency competition.
Data show that in the third quarter, the onshore RMB rose against the US dollar by 3.89%, the largest single-quarter increase since the first quarter of 2008.
Since October, the RMB exchange rate has continued to soar.
From a long-term perspective, the central parity of the RMB against the US dollar was 7.1316 on May 29 and 6.6556 on October 22. In just five months, the central parity of the RMB against the US dollar has appreciated by 4760 basis points.
From 7.1316 to 6.6556, if you exchange 100,000 US dollars, you would need 713,160 yuan at that time, and today it only needs 665,560 yuan, which can save 47,600 yuan.
RMB and USD data map.
Photo by Chinanews reporter Li Jinlei
Why has the RMB appreciated sharply?
CITIC Securities analysts clearly believe that fundamental factors have led to the appreciation of the renminbi.
The recent appreciation of the renminbi exchange rate is to a large extent a reflection of the fundamental orientation of the Chinese economy.
"China's economy took the lead in recovering during the global epidemic, playing the role of a global supply center, increasing the demand for the renminbi in the foreign exchange market." Clearly analyzed, in contrast to the United States, the impact of the epidemic on it may prevent the Fed from returning to the currency for a long time. The normalized track and long-term easing expectations have kept U.S. interest rates at a low level, while the 10-year Treasury bond spread between China and the United States has remained at a high level of around 250 basis points.
Therefore, fundamental factors, including trade surplus and Sino-US interest rate differentials, are the direct reasons for the recent boost to the RMB exchange rate.
Tan Yaling said that since China's economy is the first to recover, economic stability, and the resumption of production and production are better, coupled with the accelerated opening of China's financial market, international capital favors the Chinese market in terms of speculation, hedging, and arbitrage. This superimposing effect promotes Capital flooded into the Chinese market.
At the same time, Tan Yaling reminded that the renminbi exchange rate quotation mechanism determines the importance of overseas parameters. It does not rule out the deliberate use of overseas borrowings. With the help of China's relatively good momentum and opening-up effect, the suspicion of deliberately pushing up the renminbi subjectively should arouse great attention.
The bank staff is counting the currency.
Zhang Yunshe
The RMB exchange rate is expected to remain strong in the short term
Regarding the follow-up trend of the renminbi, he clearly believes that under the impact of the epidemic, the Fed opened its gates and released the water, and US inflation expectations suppressed the US dollar index, which is bullish for the renminbi exchange rate in the medium term.
On the other hand, the high interest rate differentials in the Sino-US bond market and the difference in the upside potential of the stock market may drive capital inflows, which will also boost the RMB exchange rate in the medium and long term.
It is expected that the exchange rate of RMB against the US dollar may fluctuate between 6.6-6.9 in the short term.
According to a research report issued by CICC, in the short term, the RMB against the U.S. dollar may remain strong, and the exchange rate of the RMB against the U.S. dollar may continue to rise slightly to around 6.5 in the short term.
Guotai Junan Research Report believes that China’s economic fundamentals are still strong, while the US economy lacks the support of new fiscal stimulus plans, and the uncertainty of economic recovery has increased. Therefore, from the perspective of economic fundamentals, the market will be 3-6 months in the future. There is still support for the RMB.
The RMB exchange rate is expected to maintain a steady and upward trend in the medium and long term.
It is expected that the renminbi exchange rate will fluctuate in the range of 6.5-6.9 in the near future, and it will rise gradually in the future. It is not ruled out that it will rise to around 6.0 in the next year.
However, CICC reminds that if you look farther, there are some factors that restrict the appreciation of the renminbi.
If the US fiscal stimulus is implemented, coupled with the improvement of the overseas epidemic next year, and the global economy recovers, the growth gap between China and overseas will narrow, and the Sino-US interest rate gap may also fall from the current high. These factors may inhibit the RMB exchange rate.
In this case, the devaluation of the RMB against the US dollar cannot be ruled out to around 7.0.
Currency profile map.
RMB appreciation has pros and cons
Wen Bin, chief researcher of China Minsheng Bank, told Chinanews.com that the appreciation of the renminbi is conducive to imports, and import companies will reduce procurement costs and increase profits.
At the same time, it is more cost-effective for ordinary people to travel abroad, study abroad, and shop.
However, it has a greater adverse impact on export companies.
Tan Yaling reminded that the current appreciation of the renminbi is putting great pressure on foreign trade companies.
The renminbi has interest rate differentials and exchange rate differentials. The huge Chinese market and the credibility of policies, coupled with the sustainability of the economy, have formed a very good understanding of foreign capital, and capital speculation is inevitable. China should be more vigilant at this time.
Obviously believes that the systemic importance of exchange rates has increased, and internal and external equilibrium has become an important goal of monetary policy, and rapid appreciation cannot be pursued.
Exchange rates are not only related to imports and exports, but also closely related to international capital flows.
From the lessons learned from Japan’s exchange rate appreciation after the Plaza Accord in 1985, we can also see that if the exchange rate is allowed to undergo speculative fluctuations such as a sharp appreciation or devaluation, the pressure on domestic asset prices will also increase, which will easily push up domestic asset bubbles.
Zhou Maohua, an analyst at the Financial Markets Department of Everbright Bank, believes that a large unilateral appreciation of the renminbi will inevitably pose a drag on domestic foreign trade and economic recovery. Once the market has serious deviations from fundamentals and irrational sentiments, the central bank cannot rule out the use of tools including countercyclical factors to guide the market. Back to reason.
Data map: People's Bank of China.
Photo by China News Agency reporter Zhang Xinglong
How will the People's Bank of China move next?
Earlier, the governor of the People's Bank of China, Yi Gang, wrote an article on October 10 that throughout the world, successful economies must maintain currency stability, which includes not only the stability of domestic price levels, but also the basic stability of exchange rates.
The Central Bank of China has decided to lower the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0 from October 12, and stated that it will continue to maintain the flexibility of the RMB exchange rate, stabilize market expectations, and keep the RMB exchange rate in a reasonable equilibrium. Basically stable on the level.
On October 14, Sun Guofeng, Director of the Monetary Policy Department of the Central Bank, stated at a press conference that the exchange rate of the renminbi against the US dollar has appreciated slightly recently. Generally speaking, this appreciation rate is relatively moderate.
On October 12, the closing price of the RMB against the U.S. dollar appreciated by 3.3% compared to the end of last year, and 2.5% compared with the average value of last year. The appreciation rate was lower than that of other major international currencies such as the euro.
In Sun Guofeng's view, the slight appreciation of the RMB exchange rate is a natural reflection of China's economic orientation.
It is normal for the renminbi exchange rate to appreciate under the promotion of market supply and demand. It is due to the fact that market supply and demand play a decisive role in exchange rate formation under a managed floating exchange rate system.
Sun Guofeng said that from the perspective of the impact of exchange rates, exchange rate fluctuations are beneficial to one side of the economic entity and disadvantages to the other side. Therefore, the exchange rate must be determined by market supply and demand to play the function of an automatic stabilizer of macroeconomics and international payments.
Of course, we must prevent excessive leverage and excessive positive feedback.
(Finish)