Chinanews, October 23, the State Council Information Office today held a press conference on foreign exchange receipts and payments data for the first three quarters of 2020.

Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said at the meeting that the recent appreciation of the renminbi is mainly supported by economic fundamentals.

  Wang Chunying said that China took the lead in controlling the epidemic and economic and social development resumed. The International Monetary Fund predicts that China will be the only major economy that will achieve positive economic growth this year.

The export situation is good, overseas long-term funds have increased their RMB assets in an orderly manner, and the RMB exchange rate has appreciated due to market supply and demand.

This is what the market supply and demand play a decisive role in the formation of exchange rates under a managed floating exchange rate system.

Overall, the appreciation of the renminbi is relatively moderate.

Since the beginning of this year, the RMB has appreciated by 4.5% against the U.S. dollar, the U.S. dollar index has fallen by 4.3%, the euro has appreciated by 5.9% against the U.S. dollar, and the Japanese yen has appreciated by 4.1% against the U.S. dollar.

In comparison, the performance of the renminbi and major currencies is basically the same.

  Wang Chunying believes that under the combined effect of internal and external factors, the RMB exchange rate is expected to continue to maintain two-way fluctuations and basic stability at a reasonable and balanced level.

A smart market can always see the positive and negative sides of the coin. It not only fully recognizes that the domestic economy is basically facing the support of the RMB exchange rate, but also pays close attention to various external instability and uncertain factors that may keep the RMB going up and down. Two-way fluctuations.

At present, the most discussed factors in market institutions include:

  First, in the long run, despite the weakening of the U.S. dollar, the current prospects for global economic recovery are uncertain and the short-term U.S. dollar trend is uncertain.

  Second, market institutions have also observed that the improvement of the global epidemic in the future will not only help increase China's external demand, but also increase imports.

At the same time, the relaxation of entry and exit restrictions by various countries will also promote the recovery of Chinese residents' needs for cross-border travel and study abroad.

Therefore, China's current account is not likely to have a large surplus.

  Third, consider the pros and cons. The current frequent international protectionism, unilateralism, and geopolitical conflicts will increase the uncertainty in the international financial market.

In fact, careful observation revealed that some indicators also reflect market views.

For example, from the domestic risk reversal indicator (the difference between the volatility of a call USD/put RMB option and a put USD/call RMB option) that can reflect exchange rate expectations, the average value since October is 0.97%, which has maintained a positive value, far below At the beginning of 2016, it was 3.03%. In May 2018, the RMB was in a period of appreciation. This value was 0.03%.

The current 0.97% is at an intermediate level in recent years, which also shows that the current market expectation of the RMB exchange rate in the medium and long term tends to be neutral.

  Wang Chunying revealed that the foreign exchange bureau will further cooperate with the People's Bank of China to continuously deepen the market-oriented reform of the RMB exchange rate and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

What the foreign exchange bureau can do more is to persist in promoting the two-way opening of the financial market, improve the facilitation of cross-border trade and investment, and while continuously expanding the domestic market’s attractiveness to foreign capital, it also provides domestic investors with more allocation of overseas finance The opportunities and conditions of assets promote the formation of a new development pattern of "dual cycles" and serve economic development.

  Wang Chunying also reminded that companies should actively prevent exchange rate risks and establish a risk-neutral concept.

Since the beginning of this year, the average 1-year implied volatility of the domestic option market has been 5%, and the fluctuation between the highest price and the lowest price is 7.5%, and the RMB exchange rate is relatively flexible.

Faced with exchange rate fluctuations, companies should strengthen their awareness of risk prevention.

First, it is necessary to change the unilateral linear thinking of whether the renminbi rises or depreciates, and establish a sense of two-way fluctuations in the renminbi exchange rate.

Second, it is necessary to conduct reasonable and prudent transactions, conduct risk assessments, and appropriately hedge exchange rate exposures.

Third, it is necessary to control currency mismatches as much as possible and rationally arrange the currency structure of assets and liabilities.

Fourth, don't use exchange rate hedging tools as speculative arbitrage tools to take unnecessary risks.