(Economic Observation) The RMB exchange rate is approaching the 6.2 range, why has it hit a new high in the past four years?
China News Agency, Beijing, February 24 (Reporter Xia Bin) After entering 2022, the RMB exchange rate has basically remained within the range of 6.3 to 6.4. The spot exchange rate is even closer to the 6.2 range.
RMB data map.
Photo by China News Service reporter Li Jinlei.jpg
According to foreign exchange market data, as of 18:00 on the 24th, the spot exchange rate of the onshore RMB against the US dollar was 6.3209, and the spot exchange rate of the offshore RMB against the US dollar was 6.3199. The highest value in the past four years since April 2018.
Why is the RMB exchange rate so strong recently?
Wang Youxin, a senior researcher at the Bank of China Research Institute, pointed out that with the intensification of the conflict between Russia and Ukraine recently, the volatility of the international foreign exchange market has increased. Renminbi assets have both liquidity, safety and profitability, and are favored by safe-haven funds.
Against the backdrop of rising expectations for interest rate hikes by the Federal Reserve, the RMB exchange rate rose against the trend, rising from around 6.36 on February 14 to below the current 6.33, continuing its strong performance.
"The risk aversion and investment attributes of RMB assets have become increasingly prominent in the past two years, especially at special times such as repeated epidemics and increased geopolitical risks." Wang Youxin said that the scale of foreign capital's allocation of assets such as RMB equity and debt International institutions such as Credit Suisse, Goldman Sachs, HSBC and other international institutions continue to sing about RMB assets, the use of RMB in international reserves and cross-border payments continues to increase, and the recognition of RMB by international capital continues to increase.
Data show that from this year to February 21, the total net inflow of northbound funds in the A-share market was 21.6 billion yuan (RMB, the same below). Legal entities held a total of 4.07 trillion yuan of bonds in the inter-bank market, a year-on-year increase of 17%.
The foreign exchange team of the Research Department of CICC stated that considering that the Sino-US interest rate differential has been falling all the way in January, and the tension in Ukraine has not disturbed the pace of foreign investment in RMB bonds, the reason for the rapid appreciation of the RMB may be the inflow of overseas funds to Chinese assets.
The Societe Generale Research macro team believes that in the short term, the process of repairing the overvaluation of the RMB exchange rate will be interrupted by risk aversion.
Before the risk aversion retreats, the "safe haven" attribute of RMB assets will support the exchange rate to remain strong, and the exchange rate of RMB against the US dollar is expected to hit the 6.30 mark.
However, this will also lead to further narrowing of the Sino-US interest rate gap, which will increase the medium-term pressure on the RMB exchange rate.
How will the RMB trend this year?
According to Zhao Wei, chief economist of Sinolink Securities, the RMB exchange rate may remain relatively strong throughout the year, and there is no basis for continuous depreciation.
He bluntly said that in 2022, the year of the "ebb" of the epidemic, the performance of the U.S. dollar index may be generally weak, and the external pressure on the exchange rate of the RMB against the U.S. dollar will not be large.
Exchange rate trends reflect changes in the relative strength of economies between economies.
With the weakening of the impact of the epidemic, non-US economies are more resilient to repair. Relatively speaking, the US dollar index may have peaked at the beginning of the year.
"The exchange rate of RMB against the US dollar that everyone is generally concerned about has no external basis for devaluation."
Zhao Wei analyzed that the support of the trade surplus in the first half of this year and the convergence of Sino-US monetary policies in the second half of the year may lead to the relative strength of the RMB against the US dollar throughout the year.
Taking into account the rhythm of the impact of the global epidemic and the maintenance of China's export competitiveness, China's export resilience may continue to be maintained at least in the first half of the year; in the second half of the year, considering the changing trend of the fundamentals of China and the United States, the monetary policies of the two countries may shift from differentiation to convergence, which will affect the exchange rate. form support.
(over)