The RMB has returned to 6.8 against the US dollar, how much room is there for appreciation?

　　Chinanews.com, January 6th (Zhongxin Finance Gong Hongyu) At the beginning of 2023, the RMB exchange rate will usher in good news.

　　According to data from the China Foreign Exchange Trading Center, on January 5, the central parity rate of the RMB against the U.S. dollar was reported at 6.8926, an increase of 205 basis points from the previous trading day, and returned to the 6.8 range again.

Data map: RMB.

Photo by Shao Wanyun, Sino-Singapore Finance and Economics

Why can the RMB exchange rate continue to rise?

　　After the RMB exchange rate rebounded at the end of last year and regained the 7.0 mark in December, the upward trend of the RMB has continued until 2023.

In this regard, many analysts believe that the recent rise in the RMB exchange rate is affected by various factors.

　　"One of the reasons for the rise in the RMB exchange rate is the improvement in sentiment." Wang Youxin, a senior researcher at the Bank of China Research Institute, said in an interview with Zhongxin Finance and Economics that with the gradual optimization of epidemic prevention and control policies, the impact of the epidemic on economic recovery is expected to weaken. Social life will gradually return to normal, and the market has stronger confidence in economic growth in 2023.

　　Wang Youxin pointed out that the rise in the exchange rate benefited from the support of the trading side.

Around the end of the year, due to liquidity needs, foreign exchange settlement by enterprises increased.

Overseas institutions have strengthened their expectations for the accelerated recovery of the Chinese economy, and they are bullish on RMB assets, and cross-border capital inflows are also increasing.

　　Not only that, the boost effect of the policy is also increasing.

　　The People's Bank of China and the State Administration of Foreign Exchange announced on December 30 that starting from January 3, 2023, the trading hours of the interbank RMB foreign exchange market will be extended to 3:00 the next day Beijing time. The application period of market management systems such as market maker quotations will be extended accordingly.

　　On the same day, the China Foreign Exchange Trade System also adjusted the weights of the currency baskets of the CFETS RMB exchange rate index and the SDR currency basket RMB exchange rate index. The weights of the US dollar, the euro, and the yen all decreased.

　　Wang Youxin said that the extension of the trading hours of the inter-bank RMB foreign exchange market, the adjustment of the weight of the currency basket and the reduction of the weight of the US dollar have further optimized the exchange rate formation mechanism, expanded the depth and breadth of the foreign exchange market, and provided global investors with investment in RMB assets and risk hedging Provides more convenience.

　　"The RMB exchange rate has been weakened by the currencies of developed economies, and the independence and autonomy of exchange rate formation has increased, which has further strengthened market confidence and led to a rapid rise in the exchange rate." Wang Youxin said.

How will the RMB exchange rate go in the future?

　　After ushering in a good start at the beginning of the year, the follow-up trend of the RMB exchange rate in 2023 has also attracted much attention.

　　Wen Bin, chief economist of China Minsheng Bank, pointed out that on the whole, the continued restoration of China's economic fundamentals and moderate inflation in 2023 will help maintain the stability of the RMB exchange rate.

Considering the fundamentals of the economy and the balance of payments,

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　　"In 2023, China's economy will start a 'restorative recovery' mode, and the main momentum of recovery will come from the elimination of factors that inhibit economic growth." Wen Bin said.

　　He specifically analyzed that the continuous optimization of the new crown epidemic prevention and control measures will boost consumer and investment confidence, and the endogenous power of the economy will gradually recover; real estate will gradually shift from a period of risk exposure to a period of risk convergence, and financing improvement and confidence recovery will become the main features. Gradually turning to a new stage of healthy and stable development, real estate has begun to turn from a negative impact on the overall economy to neutral; inflation will remain moderate, on the one hand, the recovery of domestic demand will promote the return of the mean value of core inflation and the upward movement of the center, and on the other hand, the pressure of imported inflation will ease , it will help limit the rise in inflation.

　　In Wang Youxin's view,

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As the epidemic situation in various places gradually approaches its peak and improves, activities in areas such as personnel flow, transportation, catering, and consumption will gradually resume, and market confidence will further increase.

The economic growth pressure of economies such as Europe and the United States will accelerate, and the discussion on the slowdown or shift of monetary policy will gradually heat up. The dollar will continue to fall, and the restrictive effect on the RMB will weaken.

　　"In the context of a general recession in the global economy, China's economy and RMB assets will become global highlights, attracting continued inflows of cross-border capital." Wang Youxin said.

(use up)