(Economic Watch) The exchange rate against the US dollar rose by more than 2,000 basis points. Why is the RMB strong?
China News Agency, Beijing, October 27 (Reporter Xia Bin) From 8 pm on the 25th to 10 am on the 27th, in less than 48 hours, the spot exchange rate of the offshore RMB against the US dollar rebounded strongly from the lowest point of 7.3748 to the highest. It rose to 7.1636, an increase of 2112 basis points.
Also in the last three trading days, the spot exchange rate of the onshore renminbi against the U.S. dollar has risen by more than 1,400 basis points.
What factors have driven the strength of the RMB against the US dollar?
Pang Ming, chief economist and research director of JLL Greater China, said that the main external reason for the strengthening of the RMB exchange rate is that the market's worries about the slowdown of the US economic recovery have led to the pullback of the US dollar index. The policy factor is the macroeconomic cross-border financing. The upward adjustment of the prudent adjustment parameters has released the guidance signal of the regulatory authorities and eased the concerns of investors.
From the perspective of longer-term, basic and internal factors, Pang Ming believes that the market has further digested the economic stabilization and recovery reflected in China's macro data, effective demand continues to recover, supportive policies are implemented and effective, and successive policy measures are released. Positive information such as efficiency and endogenous growth momentum of market players.
Zhou Hao, chief economist of Guotai Junan International, pointed out that for the RMB exchange rate, the position of 7.23 to 7.25 is technically very critical. Once it is broken, it means that the depreciation space above may be further opened.
The central bank has also taken several actions recently to try to support the RMB exchange rate, including raising foreign exchange reserves and raising the macro-prudential parameters of cross-border financing. Although the previous effect was not significant, with the strengthening of the euro in the external session, the offshore RMB has also swept away the haze. And there has been a rapid strengthening.
In Zhou Hao's view, the impact of the RMB exchange rate on other RMB-related assets is huge.
"Therefore, the importance of keeping the exchange rate basically stable and preventing expectations from getting out of control is self-evident. From this perspective, avoiding excessive spread of pessimism is an important consideration in financial supervision."
He mentioned that from a macro perspective, the stability of the financial system is the top priority.
Past experience has shown that there are significant pass-through effects between financial markets.
To ensure the stability of the financial system, the PBOC needs to closely monitor the dynamics of the foreign exchange market and take timely measures to prevent unnecessary market volatility.
"What we can expect is that although the RMB exchange rate will still fluctuate to a certain extent in the short term, it is difficult for the RMB to depreciate out of control."
How will the RMB trend in the future?
Pang Ming believes that, considering that China's recovery and development trend continues, the prosperity remains at a high level, the balance of payments and cross-border capital flows remain stable, the overall convergence of superimposed financial risks, the overall soundness of the financial system, and the stable operation of the financial market, the financial industry continues to be resilient. It is expected that the RMB exchange rate will remain basically stable at a reasonable and balanced level, the RMB will strengthen for a long time, and the attractiveness of RMB assets will not change.
"In general, the exchange rate is the result of a combination of various factors." Zhou Hao said that on the one hand, after the US dollar index has strengthened for a long time, there is a high probability that there will be a certain degree of adjustment, which is still necessary to ease the pressure on many other non-US currencies. very critical.
For the RMB exchange rate, the most important node is still to maintain the expected stability, and some specific points and ranges are still very important.
From a fundamental point of view, Zhou Hao said that on the one hand, China maintains a current account surplus, but also maintains a strong exchange rate against a basket of currencies, and the derivatives market reflects more rational expectations.
Therefore, in the medium term, the RMB exchange rate will remain basically stable.
(Finish)