The "safe haven" feature of Chinese assets highlights the renminbi exchange rate hitting new highs

　　Our reporter Yao Jin

　　On February 23, the exchange rate of the onshore RMB against the US dollar rose by more than 100 points, breaking the 6.32 mark to 6.313 during the session, a new high since April 2018; the exchange rate of the offshore RMB against the US dollar, which more reflected the expectations of international investors, once rose above 6.313. The 6.31 mark, a new high in nearly 4 years.

Both offshore and onshore RMB exchange rates against the U.S. dollar reached new highs.

　　Since the beginning of this year, the RMB exchange rate has continued to fluctuate upward as a whole.

On the first trading day of this year, the central parity rate of the RMB against the U.S. dollar was 6.3794. By February 24, the central parity rate of the RMB against the U.S. dollar was 6.3280, an increase of more than 500 basis points.

In fact, since June last year, the Fed's expectations of monetary tightening have continued to strengthen, and the RMB exchange rate has staged an independent market that bucked the trend and strengthened against the backdrop of the gradual rise in the US dollar index.

　　Why will the RMB continue to strengthen?

Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, believes that it is mainly driven by domestic fundamentals and the risk-averse nature of the RMB. The outlook for recovery is optimistic, and expectations for further easing of policy by the central bank in the short term have cooled; on the other hand, the expected tightening by the Federal Reserve and the rising international geopolitical situation have increased the uncertainty of the outlook for global economic recovery, intensified global market volatility, and a certain risk aversion in the market At the same time, the dollar remained in a weak range and fluctuated."

　　Chang Ran, a senior macroeconomic researcher at the Zhixin Investment Research Institute, said that the RMB has attracted the attention of international investment institutions in Europe and the United States due to its "low-risk" characteristics such as relatively low volatility and stable purchasing power.

Recently, the price of global risk assets has fallen under the disturbance of geopolitics and the expectation of interest rate hike by the Federal Reserve, and the attractiveness of RMB assets has become more apparent.

　　Industry insiders believe that China's economy is resilient, and the renminbi is more likely to win the favor of international capital, and the continuous inflow of international capital into renminbi assets boosts the appreciation of the renminbi.

　　Will the strengthening of the RMB continue?

In the view of industry insiders, the RMB will remain strong in the short term, but in the medium term, as the monetary policy of the world's major developed economies turns faster, the divergence between the monetary policies of China and the United States will increase significantly, which may cause the RMB to face depreciation. pressure.

　　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 a further narrowing of the Sino-US interest rate gap, which will increase the medium-term pressure on the RMB exchange rate.

　　The latest research report of the Bank of China Research Institute believes that in the near future, the exchange rate market risks caused by cross-border capital flows are worthy of attention: First, the downward pressure on the exchange rate has increased.

Since the second half of 2020, the inter-bank foreign exchange market has experienced increased volatility, and banks' foreign-related receipts and payments have continued to be in surplus, and the RMB exchange rate has remained high.

However, due to the accelerated normalization of the Federal Reserve's monetary policy, the divergent direction of the monetary policies of China and the United States, and the continued rise of the US dollar index, it is necessary to anticipate and respond to the possibility of a sudden reversal of the RMB exchange rate trend.

The second is the impact of the withdrawal of speculative hot money.

Last year, the risk of global inflation expectations rose. Some of the offshore hot money was speculative, buying more RMB while increasing the purchase of government bonds. Once the RMB exchange rate depreciated, these hot money would quickly flee the market at the right time, causing confusion in the exchange rate market and the interest rate market. Double shock.

　　"Therefore, it is necessary to prevent the withdrawal of short-term hot money, pay attention to whether there is underground capital transfer, especially the outflow of gray capital hidden in the net error and legacy items, and severely crack down on illegal cross-border capital transfer such as underground banks." Bank of China Research The research report said.

　　"In the next stage, the RMB exchange rate will still have some resilience, but it does not have the conditions for continuous appreciation." Chang Ran believes that the trend of the RMB exchange rate this year will be "mainly driven by me", and it is expected that the Fed's interest rate hike will have a relatively limited impact on the RMB exchange rate. It will be more balanced, and the RMB exchange rate will maintain two-way fluctuations with strong flexibility.