Go up and up!
It costs 65,600 less for 100,000 US dollars!
Will the RMB continue to appreciate?
Sino-Singapore Jingwei Client, January 5 (Wei Wei) The central parity of the RMB against the US dollar has continued to rise and has entered the 6.4 era.
According to the China Foreign Exchange Trade System, on January 5, the central parity of the RMB against the US dollar in the inter-bank foreign exchange market was reported at 6.4760 yuan, a sharp increase of 648 basis points from the previous trading day, reaching the highest level since June 27, 2018.
Will the appreciation of the renminbi continue?
Source of RMB data: Photo by Xiong Jiali, China-Singapore Jingwei
For 100,000 US dollars, 65,600 yuan less
On the first trading day of the year (January 4th), the RMB exchange rate rose like a rainbow.
The offshore renminbi broke the 6.45 mark against the U.S. dollar and rose to a maximum of 6.4417 yuan; the onshore renminbi broke the 6.50 mark against the U.S. dollar, rising above the high since June 2018.
After the market exchange rate adjusted substantially, the central parity of the RMB against the US dollar also rose sharply by 648 basis points to 6.4760 yuan on January 5.
Screenshot of China Foreign Exchange Trading Center official website
On January 5, the onshore renminbi against the U.S. dollar and offshore renminbi against the U.S. dollar set a new high for two and a half years.
According to Wind data, as of press time, the onshore renminbi against the U.S. dollar once rose above the 6.43 mark; offshore renminbi against the U.S. dollar hit 6.42, reaching a maximum of 6.4128.
Then both fell back.
Onshore RMB chart source: Wind
In addition, data shows that on March 19, 2020, the US dollar index closed at 102.88. As of the end of May, it has been fluctuating in the 97-100 range. Since then, the US dollar index has fallen all the way.
As of press time, the U.S. dollar index once hit 89.7, down 12.81% from March 19 last year.
Time is set back to June 1, 2020, when the central parity of RMB against the US dollar was reported at 7.1315.
More than a month later, on July 27, the central parity of the RMB against the U.S. dollar broke through 7. Then in August and September, it fluctuated in the 6.8-6.9 range. It rose to the 6.6 range on October 21 and rose to around 6.5 on November 17. Nearby, it has returned to 6.5 since June 2018.
Today, in less than two months, the central parity of the RMB against the US dollar has risen to 6.4 times.
In other words, the dollar has depreciated and the renminbi has become more valuable.
Calculated at the median price, if a resident exchanges 100,000 U.S. dollars in foreign currency, it will need 713,000 yuan in June last year, but today it only costs 647,000 yuan, a difference of about 65,600 yuan.
What factors caused the appreciation of RMB?
Regarding the recent appreciation of the renminbi, Galaxy Futures pointed out in a research report that, in addition to the steady progress of the Chinese economy and the more flexibility of the renminbi exchange rate in anticipation of the new exchange rate reform, the sharp rise in the renminbi exchange rate is a good reason for the completion of the China-EU investment agreement before the new year. A new factor.
Galaxy Futures believes that in the narrow sense of the US dollar index, the euro occupies an absolute dominant weight, causing the US dollar index to directly fall below 90 points recently.
Although the renminbi is not a basket currency of the dollar index, the central parity of the renminbi requires stability against a basket of currencies, and the decline in the dollar index puts upward pressure on the central parity of the renminbi.
Industrial Research said that in the beginning of 2021, affected by the rigid exchange settlement before the Spring Festival and the foreign investment allocation, the RMB is expected to appreciate in the first quarter.
Looking back at 2020, the RMB exchange rate against the US dollar will depreciate first and then rise. This round of appreciation roughly started in June last year and has lasted for nearly 7 months.
In this regard, Pan Helin, executive dean and professor of the Institute of Digital Economy of Zhongnan University of Economics and Law, pointed out in an interview with the Sino-Singapore Jingwei client that there are four main reasons for the sharp rise in the RMB exchange rate: First, the weakening of the US dollar due to the US stimulus plan Passed, opening a new currency printing cycle; second, China's economic performance is strong, foreign trade has improved, and international demand for renminbi has increased; third, due to the epidemic, Chinese people’s plans to go abroad have decreased, and the demand for foreign currency exchange has decreased; fourth, China’s interest rates have normalized and appeared This has led to the inflow of foreign capital for arbitrage.
China-Singapore Jingwei reporter noted that since the fourth quarter of 2020, the central bank and foreign exchange management departments have also taken frequent actions.
First, reduce the forward repurchase risk reserve ratio to zero, and then fade the countercyclical factor out of the RMB central parity quotation model.
On December 11 last year, the Central Bank and the State Administration of Foreign Exchange issued an announcement stating that they decided to lower the macro-prudential adjustment parameter for cross-border financing of financial institutions from 1.25 to 1.
"This may be related to the continuous strengthening of the RMB exchange rate in the second half of last year." Mingming, deputy director of the CITIC Securities Research Institute, pointed out to the Sino-Singapore Jingwei client that the macro-prudential adjustment parameters actually affect the risk-weighted balance of corporate cross-border financing. The upper limit, because some companies will convert the U.S. dollar back to the renminbi for use after financing in the U.S. dollar, the downward adjustment of the adjustment parameters is a tightening of the issuance of foreign debt by financial institutions. To a certain extent, it may reduce the demand for renminbi and reduce the renminbi Appreciation pressure.
In addition, on December 31, 2020, the Foreign Exchange Trading Center issued an announcement stating that starting from January 1, 2021, the weight of the CFETS RMB exchange rate index basket currency will be adjusted.
Lower the currency weight of the US dollar to 0.1879, and raise the weight of the euro, Hong Kong dollar, British pound, and Australian dollar.
Obviously believe that the adjustment is to more accurately reflect the trade situation with other countries.
From the impact point of view, appropriately reducing the weight of the US dollar based on trade conditions can enhance the flexibility of the RMB exchange rate, further promote the market-oriented reform of the RMB exchange rate, and avoid large fluctuations in the RMB exchange rate caused by the trend of a single currency.
It is worth noting that the Central Economic Work Conference in 2018 and 2019 did not mention the "exchange rate".
The 2020 Central Economic Work Conference mentioned that it is necessary to "deepen the reform of interest rate and exchange rate marketization and maintain the basic stability of the RMB exchange rate at a reasonable and equilibrium level."
Recently, the Monetary Policy Committee of the People's Bank of China held regular meetings in the fourth quarter of 2020.
The meeting emphasized to deepen the reform of interest rate and exchange rate marketization, improve the market-based interest rate formation and transmission mechanism, guide enterprises and financial institutions to adhere to the "risk-neutral" concept, stabilize market expectations, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
The RMB exchange rate may continue to be strong in 2021
Looking forward to the trend of the RMB exchange rate in 2021, Industrial Research pointed out that the appreciation cycle of the RMB exchange rate from the second half of 2020 is likely to continue to the first half of 2021; in the second half of the year, focusing on changes in the US dollar index and the rate of decline in the scale of social financing, the RMB may appreciate The trend turned into a shock trend.
Qu Qiang, assistant to the director and researcher of the Institute of International Monetary Studies, Renmin University of China, analyzed the Sino-Singapore Jingwei client, that the exchange rate of the RMB against the US dollar may continue to rise and is expected to fluctuate in the 6.1-6.3 range in 2021.
Source of currency exchange data: Photo by Wei Wei, China-Singapore Jingwei
"The U.S. dollar may depreciate first in 2021. If everything goes well, in the middle of this year, the vaccine plays a role and the U.S. economy recovers, then it is possible that there will be a certain dollar tightening expectation at the end of 2021." Pan Helin said.
In Pan Helin's view, the RMB exchange rate will continue to be strong in 2021 until the United States and Europe are completely free from the epidemic and the economy recovers.
Later, these countries may need to tighten their currencies. At this time, the RMB exchange rate will generally stabilize and fluctuate within the range.
In terms of investment, he believes that the strength of the renminbi will benefit the capital market and asset prices, and China may enter the era of liquidity input.
Internally, imported inflation should be prevented, but the inflow of capital is generally good for the Chinese economy.
Qu Qiang also said that the appreciation of the renminbi may lead to rising asset prices in China, especially the stock market and real estate market.
The large and rapid inflow of foreign capital needs to be closely monitored.
Bank futures believes that in the case of RMB appreciation, it is necessary to see both favorable and unfavorable factors, maintain managed floating, conduct managed two-way floating, and maintain the basic stability of the RMB exchange rate at a reasonable and equilibrium level It is the most realistic choice.
(Zhongxin Jingwei APP)
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