(Economic Observation) The "countercyclical factor" fades out, how will it affect the RMB exchange rate?
China News Agency, Beijing, October 28 (Reporter Xia Bin) After the Central Bank of China lowered the foreign exchange risk reserve ratio for forward foreign exchange sales to 0, the secretariat of the foreign exchange market self-discipline mechanism recently stated that the central parity of RMB against the US dollar is quoted. Adjust the quotation model, and the countercyclical factor is fading out.
The above-mentioned secretariat stated that since the beginning of this year, China's foreign exchange market has been operating smoothly, the international balance of payments has tended to be balanced, and the RMB exchange rate has been floating in both directions on the basis of market supply and demand with increased flexibility.
It is understood that some recent quotation banks for the central parity rate of RMB against the US dollar, based on their own judgments on economic fundamentals and market conditions, have taken the initiative to fade out the use of the "countercyclical factor" in the central parity price model of RMB against the US dollar.
The secretariat stated that the adjusted quotation model is conducive to enhancing the transparency, benchmarking and effectiveness of the mid-price quotations of quoting banks, and it is also a manifestation of the role of market entities in the self-discipline mechanism of the foreign exchange market.
In fact, since 2017, the countercyclical factor was introduced in the quotation model of the central parity rate of the RMB against the US dollar, and along with the expected appreciation and depreciation of the RMB, the countercyclical factor has undergone many adjustments and uses.
From the previous adjustment law, when the RMB exchange rate continues to depreciate and the market forms a unilateral depreciation expectation, the countercyclical factor will be restarted to hedge against procyclical fluctuations in market sentiment. When the RMB exchange rate continues to appreciate, cross-border capital flows remain stable When, the countercyclical factor will return to neutral.
The current situation is more towards the latter. The RMB has maintained an appreciation trend in the past few months, and the cross-border capital flow and the supply and demand relationship in the foreign exchange market are relatively stable.
Sun Guofeng, Director of the Monetary Policy Department of the Central Bank of China, previously pointed out that the slight appreciation of the RMB exchange rate is a natural reflection of China's economic orientation.
It is normal for the RMB exchange rate to appreciate under the promotion of market supply and demand, and it is due to the decisive role of market supply and demand in the formation of exchange rates under a managed floating exchange rate system.
Wang Youxin, a researcher at the Bank of China Research Institute, said that the use of countercyclical adjustment factors is gradually fading out in line with market situation changes and policy expectations.
From a macro background, the use of counter-cyclical adjustment factors is mainly to stabilize the exchange rate and avoid the procyclical behavior of the downward spiral of the exchange rate and the "herding effect" of companies competing for foreign exchange purchases during a crisis. Therefore, they are more often used in the devaluation phase. , To play the role of stabilization and counter-cyclical regulation.
He further stated that since the end of May, the market situation has gradually improved, the RMB has gradually entered a stage of appreciation, and the trend has gradually stabilized.
Since May 28, the appreciation of the renminbi has been around 7%. Affected by this, the exchange rate of enterprises has increased, the exchange rate of sales has fallen, the situation of foreign exchange supply and demand and cross-border capital flows has improved, and the foreign exchange market risk has dropped significantly.
In this context, the gradual return of counter-cyclical adjustment factors to neutrality is in line with changes in the market situation and is conducive to the stability and orderly fluctuation of the RMB exchange rate.
Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange of China, reminded that since this year, the RMB exchange rate has become more flexible.
In the face of exchange rate fluctuations, companies should strengthen their awareness of risk prevention, and need 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.
Don't use exchange rate hedging tools as speculative arbitrage tools and take unnecessary risks.
Wang Youxin predicts that the RMB will continue to be in a strong phase driven by economic fundamentals and the spread between Chinese and foreign interest rates. However, considering that the second recession and financial market volatility in Europe and the United States may occur in the fourth quarter may drive the US dollar to rebound against the trend, and regulators continue to With the release of the regulatory intention, it is expected that the short-term volatility of the RMB exchange rate will increase and fluctuate around the potential trend level.
(Finish)