Beijing, 9 Sep (ZXS) -- In September, the exchange rate of the renminbi against the US dollar has seen another wave. Taking the onshore RMB against the US dollar as an example, compared with the closing price of 9.9 on August 8, as of 31 a.m. on September 7, the lowest value had touched 2595.9, which not only depreciated by nearly 9,3 basis points in just a few days, but also hit a minimum value in more than 7 years.

The offshore yuan, which is basically synchronized with the onshore yuan, also updated its lowest value in the year, also touching a new low of 9.7 in the early morning of the 3679th, and the central exchange rate of the yuan against the US dollar also fell below the 7.2 mark, the latest trading day at 7.2150. The dollar index continued its rebound after falling below 7 since mid-July, and has recently risen back above 100.

Why has the RMB depreciated again against the US dollar recently? Pang Ming, chief economist and director of research department of JLL Greater China, told China News Agency that the recent phased pressure on the RMB exchange rate against the US dollar is mainly due to the passive depreciation in the context of the strengthening of the US dollar index and the expected widening of the Sino-US interest rate differential.

Specifically, the Fed is likely to keep interest rates at restrictive levels for some time to come, as the US inflation problem remains stubborn, and a number of recent positive leading indicators of the US economy suggest that the US economy is more likely to achieve a soft landing to slow growth. Meanwhile, Eurozone PMI (purchasing managers' index) data and leading indicators of major economies were both subdued, and risk aversion was on the rise again amid recession fears.

"These factors have allowed the dollar index to rise in the near future, which correspondingly puts short-term, phased and volatile pressure on the exchange rate of the renminbi against the dollar." If we observe the RMB exchange rate index of the China Foreign Exchange Trading Center, which tracks the movement of the RMB exchange rate against a basket of currencies, we can find that there has been a relatively obvious trend of stabilization and recovery in the past month. Pang said.

Wang Youxin, a senior researcher at the Bank of China Research Institute, said that Saudi Arabia's announcement that it will extend oil production cuts to the end of the year, coupled with the approaching heating season in the northern hemisphere, has made the market worry about energy shortages heated, crude oil prices rose rapidly, which not only increased the downward pressure on the economy, but also made the market worry about inflation in Europe and the United States become more stubborn, and the European and American central banks may further extend the tightening of the monetary cycle, which boosts the dollar and U.S. bond yields, and suppresses the exchange rate trend of non-U.S. currencies including RMB.

Some experts believe that in the short term, the main reason is that the market may still have some doubts about the economic recovery, such as the continuous cooling of the service PMI index in recent months, the decline in China's interest rates, the recent strong rebound of US dollar interest rates, and stock market fluctuations, all of which have disturbed the short-term foreign exchange market.

Can the RMB rise back against the US dollar? Wang Youxin expects that in the short term, with higher energy prices, the pace of core inflation in the United States may continue to slow down, and the Fed will continue to repeatedly hype the topic of interest rate hikes until November. Coupled with the downside risks to the global economy and the euro area economy, the dollar index is likely to remain relatively strong. However, in the long run, the downturn in the US economy and the decline in economic indicators will make the Fed consider ending the interest rate hike cycle, and the dividends of China's economic stabilization policy will be gradually released in the fourth quarter.

In fact, the foreign exchange market itself is greatly affected by expectations, but expectations can change at any time. Some people believe that short-term fluctuations do not change the rebound trend of the RMB exchange rate during the year, the momentum of economic recovery is expected to gradually improve, the trend of macro risks converges, the RMB has solid fundamental support, and the People's Bank of China has more tools to stabilize the exchange rate.

Pang mentioned that recently, the relevant departments have adopted policies and measures such as introducing counter-cyclical factors, raising macro-prudential adjustment parameters for cross-border financing, issuing offshore central notes and government bonds, and lowering the reserve ratio of foreign exchange deposits, strengthening the effective management and reasonable guidance of market expectations, and the tool options retained in the future policy toolbox are still relatively sufficient, and China has the foundation, strength, confidence, ability and means to maintain the basic stability of the RMB exchange rate.

He further said that it is expected that the decisive role of the market on the exchange rate will be upheld, the flexibility of the RMB exchange rate will be enhanced, the strength and mechanism of RMB exchange rate correction will be improved, and the RMB exchange rate will continue to remain basically stable at a reasonable and balanced level. (End)