(Economic Watch) The RMB exchange rate is approaching 6.9, how will it go after hitting a new low this year?
China News Agency, Beijing, August 26 (Reporter Xia Bin) The RMB exchange rate, which has stabilized since the middle of this year, has recently experienced a round of fluctuations, approaching the 6.9 mark.
In the foreign exchange market on August 24, the spot exchange rates of onshore RMB and offshore RMB against the U.S. dollar hit 6.8694 and 6.8874 respectively when they were the lowest, setting a new record for the year;
What is the reason for the falling RMB exchange rate?
Wang Youxin, a senior researcher at the Bank of China Research Institute, told a reporter from China News Agency that the recent fall in the RMB exchange rate was mainly affected by three factors.
First, due to factors such as the Fed's continued rate hike process and the weakening of the euro, the external dollar index continued to rise, putting pressure on the RMB exchange rate to adjust.
Second, the central bank has recently lowered the medium-term lending facility and the loan market quoted rate (LPR) respectively, and the monetary policy trends of China and the United States continue to diverge, which will cause certain disturbances to short-term cross-border capital flows and exchange rates.
Third, the recent outbreak of the epidemic in some domestic cities, the lack of willingness to invest and consume by enterprises and residents, the slow recovery of the real estate industry, and the slowdown in the growth rate of social financing have increased exchange rate volatility to a certain extent.
In fact, the major non-dollar currencies have depreciated to a certain extent against the US dollar recently.
Recently, the exchange rate of the euro against the dollar fell below parity again, hitting a new low in nearly 20 years.
From August 15th to 24th, the US dollar index rose sharply by 2.81%, which was the main reason for the depreciation of the RMB against the US dollar by 1.94% in the same period.
What will be the impact of this round of RMB devaluation?
Wang Youxin pointed out that judging from the current situation, this round of RMB correction has not led to the rapid outflow of cross-border capital.
In the past half month, the correction of the RMB exchange rate was 1.6%, but the cross-border capital under the Mainland Stock Connect still maintained a net inflow, with a cumulative net inflow of 13.25 billion yuan.
This is mainly due to changes in two aspects. On the one hand, external economies such as Europe and the United States are facing increasing risks of economic recession, rapidly tightening monetary policy, increasing financial market volatility, and facing great uncertainty in the return on financial investment.
On the other hand, China's fiscal and monetary policies continue to increase, and the economic recovery is expected to continue to improve. Investing in RMB assets combines safety, liquidity and profitability, and will play a good role as a financial safe haven in the context of increasing external market volatility.
"Therefore, from this perspective, the negative impact of this round of exchange rate correction on cross-border capital flows is limited," Wang Youxin said.
In addition, he also said that for import and export trade, a moderate correction of the RMB exchange rate is conducive to enhancing the competitiveness and price advantage of export trade, and promoting the recovery of the real economy, but the import cost of import enterprises will increase.
Wang Youxin suggested that in the face of a more flexible and flexible RMB exchange rate, import and export enterprises should establish a risk-neutral concept and take various measures to deal with exchange rate fluctuations, such as increasing the proportion of RMB trade settlement, agreeing on exchange rate compensation or adjustment mechanisms in contract negotiations, Use financial derivatives to hedge exchange rate risks, etc.
Judging from the past two trading days, the spot exchange rate of RMB against the US dollar has basically fluctuated around the 6.85 line, and has not continued to weaken significantly.
How will the exchange rate go in the future?
A strong dollar is one of the key factors driving the decline of the RMB exchange rate.
Wang Youxin said that the trend of the US dollar index is expected to be at the end of the line, and the possibility of continuing to rise sharply is low.
The Fed's rate hike has reached the second half. It is expected that after the sharp rate hike in September, the rate hike process in the fourth quarter will slow down significantly, and the rate will return to the normalized level of 25 basis points.
"The downward pressure on the U.S. economy is gradually increasing, and economic indicators such as production, consumption, and investment are all showing a downward trend. It is expected that the U.S. dollar index will gradually fall from a high level after September." However, Wang Youxin also reminded that considering that the euro area is facing more severe challenges Inflation and the threat of economic recession, under the influence of risk aversion, the dollar index is expected to have a limited correction in the fourth quarter.
The chief economist of CITIC Securities clearly believes that the current trade surplus remains high and the inflow of foreign direct investment (FDI) has increased year-on-year. Therefore, the trend of the US dollar index has caused certain disturbances to the RMB in the short term.
Overall, the balance of payments in 2022 is in a state of balance, and the RMB is likely to remain volatile.
Wang Qing, chief macro analyst at Orient Jincheng, believes that with the strengthening momentum of domestic economic recovery and China's balance of payments is expected to maintain a surplus situation, it is difficult to effectively gather RMB depreciation expectations. 6.9 interval.
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