(Economic Observer) The RMB exchange rate has rebounded strongly and returned to the "6" range. What is the driving force for the surge?
China News Agency, Beijing, December 5th (Reporter Xia Bin) The exchange rate of RMB against the US dollar has returned to the "6" range.
In the foreign exchange market on December 5, both the onshore and offshore renminbi against the U.S. dollar spot exchange rate rose above the integer point 7, and the highest point of the offshore renminbi hit 6.9349. and 6.9501.
What is the driving force behind the surge in the yuan?
"The RMB exchange rate rose back to less than 7 in early December, which is in line with previous expectations from the basic trend." Wang Youxin, a senior researcher at the Bank of China Research Institute, told a reporter from China News Agency that the previous decline in the RMB exchange rate was caused by a combination of internal and external factors: externally, the Fed over Rapid interest rate hikes have narrowed or even inverted the interest rate differential between China and the United States, and cross-border capital flows back to the United States, increasing exchange rate fluctuations; internally, the epidemic has repeatedly occurred in some regions and cities, which has affected market expectations.
Wang Youxin said bluntly that at present, both internal and external factors have undergone positive changes, pushing the RMB exchange rate back to a rational fluctuation and balanced value range.
Specifically, on the one hand, with the decline in US inflation and slowing economic growth, the Fed’s tightening expectations are gradually loosening, and interest rate hikes are coming to an end. Whether it is from the point of view of the monetary policy cycle or the economic recovery cycle, there is another dynamic change between China and the United States. .
On the other hand, recently, the epidemic prevention and control policies in various parts of China have been further optimized, and the prevention and control plans have become more scientific and precise. The flow of people, logistics, catering, tourism, transportation, industrial production and other fields are expected to return to normal in an orderly manner.
Pang Ming, Chief Economist and Director of Research Department of Jones Lang LaSalle, told the reporter of China News Agency that from a policy perspective, various departments and regions are seizing the window period of the fourth quarter and striving to sprint to further benefit enterprises. To reduce poverty, reduce taxes and fees, revitalize the stock of special bonds, optimize the structure of fiscal expenditures, focus on the construction of major projects, promote the upgrading of manufacturing industry, and expand the stability of effective investment, supplemented by digging deep potential, emphasizing bulk consumption, and promoting consumption recovery.
He further stated that in the tough season and the closing season, policy measures to stabilize the economy and stabilize growth will be more effective. The resilience of the fundamentals and the overweight policy will play a positive role in stabilizing and promoting the RMB exchange rate.
Pang Ming also mentioned that historical data shows that the RMB exchange rate usually has the characteristics of seasonal strengthening at the end of the year, supported by exporters' remittance and other foreign exchange settlement needs.
What is the future trend of RMB exchange rate?
Wang Youxin said that in the context of the continued recession of the global economy next year, the Chinese economy is expected to become a bright spot in the world, thereby attracting cross-border capital to flow into the country at an accelerated rate and increasing the allocation of RMB assets.
Therefore, in the context of the current internal and external policy adjustments, it is expected that the RMB exchange rate will continue to fluctuate and rebound.
The research of some institutions also predicts that as the epidemic situation improves and external confidence in China's economy picks up, the exchange rate of RMB against the US dollar should appreciate in the second half of next year.
Pang Ming believes that in the long run, considering that China's economy continues to recover, reflecting many positive factors such as boosting industrial output, stabilizing consumption, increasing investment and stimulating foreign trade, it will provide a strong momentum for the stabilization and recovery of the world economy. All countries provide broader market opportunities. It is expected that the RMB exchange rate will continue to remain basically stable at a reasonable and balanced level, better play the decisive role of the market in exchange rate formation, and continue to improve the transparency of the RMB exchange rate flexibility and the formation of the central parity rate.
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