The RMB exchange rate trend is stable and supported
Recently, the RMB exchange rate and the US dollar index have shown a "double-strong" pattern.
On November 16, the onshore renminbi rose above the 6.37 mark, setting a new high since June 1.
At the same time, the US dollar index also stood at 95 points.
In the context of the recent strength of the US dollar, the three major RMB exchange rate indexes rose instead of falling, showing strong performance.
Experts predict that the short-term US dollar index is expected to remain strong, and near the end of the year, supported by strong exports, demand for RMB settlement is strong, and the RMB exchange rate is also expected to maintain a strong performance.
The RMB and the U.S. dollar have seen the same rise
Affected by the significantly higher-than-expected year-on-year increase in the U.S. CPI in October, the U.S. dollar index continued to strengthen and hit the highest level since July 2020.
The renminbi has also performed strongly.
According to data released by the China Foreign Exchange Trading Center, as of November 12, the CFETS RMB exchange rate index was 101.08, a new high since December 2015, with a weekly increase of 0.25; the BIS currency basket RMB exchange rate index reported 105.25, a weekly increase of 0.1; SDR The currency basket renminbi exchange rate index reported 99.49, a weekly increase of 0.28.
Since the beginning of this year, the CFETS RMB exchange rate index has increased by more than 6%.
"Recently, inflation in the United States has risen sharply, and monetary policy tightening is expected to heat up. At the same time, the Bank of England postponed an interest rate hike in November, and the President of the European Central Bank reiterated that it will not raise interest rates next year. Cooling down." Wang Qing, chief macro analyst at Oriental Jincheng, said that the latest trends in monetary policy on both sides of the Atlantic are the main reason for the recent rise in the U.S. dollar index.
In the context of the rise in the US dollar index, the RMB exchange rate against the US dollar did not depreciate at the same time, but instead appreciated, which directly pushed the three major RMB exchange rate indices to a greater upward trend.
Wang Qing believes that there are two supporting factors behind the recent strong operation of the renminbi: First, entering the fourth quarter, my country’s exports remain strong, export companies’ foreign exchange demand pushes up the renminbi exchange rate, and market sentiment is more inclined to increase the renminbi; second, November 16 The heads of the U.S. and Japan held a video meeting.
This meeting increased the positive expectations of the international community on Sino-US relations, and it also became an important reason for the strong trend of the RMB exchange rate during the period when the U.S. dollar surged.
China Postal Savings Bank researcher Lou Feipeng believes that the fundamentals of the US economy are generally better than those of Europe and Japan, and that monetary policy tightened earlier than that of Europe and Japan, supporting the rise of the US dollar index from the perspective of economic fundamentals and policies.
China's economy has continued to recover steadily, and exports have continued to be higher year-on-year, providing support for the RMB exchange rate from the economic fundamentals; the monetary policy has maintained continuous stability, providing support for the RMB exchange rate from the policy side.
Two-way fluctuations in the RMB exchange rate are the norm
Will the situation where the RMB and the US dollar rise at the same time will continue?
The industry believes that this depends on the supporting factors behind the two.
The key factor behind the strength of the renminbi is exports.
Under the global epidemic, China's highly resilient supply chain has supported exports.
In addition, the steady flow of funds into China, and the domestic dollar deposits of Chinese companies surpassed the 1 trillion U.S. dollar mark, also quelling the fluctuations in the renminbi. Once the renminbi depreciates, companies will take the opportunity to settle foreign exchange and push the renminbi up again.
The recent strength of the U.S. dollar is mainly due to higher-than-expected inflation in the U.S., which drives nominal economic growth and strengthens expectations of interest rate hikes.
Under the influence of the sentiment that interest rate hikes are expected to advance, the short-term dollar index is expected to remain strong.
Zhou Maohua, a macro researcher at the Financial Markets Department of Everbright Bank, predicts that the US dollar index center will continue to rise in the future. This is mainly because the US dollar liquidity environment or the US financial environment tends to "close" in the medium term. Recycling the liquidity of the US dollar in the global economic system; at the same time, the US has recovered relatively earlier than other developed economies such as Europe, and fundamentals and policies will also benefit the US dollar.
Regarding the future trend, Wang Qing judged that my country’s export momentum will not significantly weaken before the end of the year or even the first half of next year, and the exchange demand of export companies will continue to support the renminbi exchange rate; after the first video meeting between China and the US dollar, a series of specific arrangements will gradually be implemented. It will also form an upward traction on the RMB exchange rate.
Therefore, the renminbi exchange rate will likely continue its strong momentum in the short term.
"Looking forward to 2022, the gap in economic growth between China and the United States may gradually narrow. The Fed's direction of tightening monetary policy is relatively certain, while domestic monetary policy will continue to adhere to a flexible, accurate, and reasonable and appropriate tone, and the possibility of a wider margin will not be ruled out. Therefore, it is unlikely that the renminbi will continue to go out of unilateral appreciation in the future, and it will return to a two-way volatility pattern with a high probability." Wang Qing said.
Zhou Maohua also believes that the renminbi will continue to operate near a reasonable and equilibrium level, and two-way fluctuations will be normalized.
First of all, economic fundamentals and policies are firmly at stake.
The economy is expected to operate within a reasonable range, and the monetary policy will continue to maintain a sound tone; secondly, the international balance of payments is basically balanced, and the two-way cross-border capital flow is rational and orderly; thirdly, the future momentum of the US dollar will be moderate.
There are still more than 4 million jobs in the United States that have not been filled, the epidemic has not been fully controlled, and the process of normalization of US policies has been slow.
It is worth noting that the current outlook for global epidemic prevention, economic recovery and inflation is not clear enough, the recovery of countries is not balanced, policy differentiation has triggered investor divergence, and market volatility is relatively sharp.
More market entities tend to use RMB
In order to avoid exchange rate risks, more market entities tend to choose to use RMB in cross-border trade and investment.
The 2021 Renminbi Internationalization Report recently released by the People's Bank of China shows that cross-border renminbi settlements related to the real economy, such as current accounts and direct investments, have grown rapidly, and the use of renminbi in important areas such as commodities and ASEAN and other regions has further increased.
According to statistics, in the first half of this year, the total amount of cross-border RMB receipts and payments by banks on behalf of customers was 17.57 trillion yuan, a year-on-year increase of 38.7%.
According to data released by the Global Banking, Finance and Telecommunications Association, in June this year, the renminbi ranked fifth among the major international payment currencies.
"Generally speaking, export companies will use more powerful currencies for trade settlement. The rise of the RMB index against a basket of currencies this year means that the RMB has appreciated against most currencies. Overseas companies charge RMB for exports to China, which not only avoids exchange losses. Risks, after the conversion into the national currency, there will be a certain range of exchange gains, which will increase profits." Wang Qing believes.
In Zhou Maohua's view, this reflects that global investors are optimistic about China's economy for a long time, and the renminbi has become one of the most stable currencies in the world.
More and more foreign trade companies have increased the proportion of RMB settlement when signing foreign trade contracts next year.
The increasing enthusiasm of domestic and foreign companies to use RMB is also an important manifestation of the solid progress of RMB internationalization.
The central bank stated that in the next stage, it will adhere to market-driven and independent choice of enterprises, further improve the policy support system and infrastructure arrangements for the cross-border use of RMB, promote the two-way opening of the financial market, develop the offshore RMB market, and create more opportunities for market entities to use RMB. Convenient environment, while further improving the prudent management framework for cross-border capital flows, to maintain the bottom line of no systemic risks.
(Economic Daily reporter Yao Jin)