Hedging properties are heating up! The RMB has hit a new high in four years. How will the market go?

　　Sino-Singapore Jingwei, February 25 (Wei Wei intern Chai Xinyang) Recently, the RMB exchange rate has been trending strongly, and the offshore and onshore RMB exchange rates against the US dollar have successively hit new highs.

On the 24th, Russia launched a military operation against Ukraine, and the global risk aversion increased.

Will the RMB exchange rate trend be affected and will it continue to appreciate in the future?

RMB exchange rate hits four-year high

　　Since the beginning of this year, the exchange rate of the onshore and offshore RMB against the US dollar has continued to fluctuate upwards in the previous year, and has ushered in a stronger wave of rises recently.

　　According to foreign exchange market data, on February 24, the exchange rate of the onshore RMB against the U.S. dollar reached a maximum of 6.3095, standing at the 6.3 mark, and the exchange rate of the offshore RMB against the U.S. dollar reached a maximum of 6.3016, both hitting new highs since April 2018.

On the afternoon of February 24, news of the escalation of the conflict between Russia and Ukraine came, and the onshore and offshore RMB exchange rates against the US dollar fell slightly, closing at 6.3283 and 6.3229 respectively.

　　On February 25, the RMB continued to maintain its strength.

As of press time, the exchange rates of the onshore and offshore RMB against the US dollar reached a maximum of 6.3123 and 6.3057, and are about to enter the 6.2 range.

　　Why has the RMB appreciated recently?

Fan Ruoying, a researcher at the Bank of China Research Institute, analyzed Sino-Singapore Jingwei that the continued strengthening of the RMB exchange rate is mainly supported by three factors: first, the overall performance of China's economy is relatively stable, which has enhanced foreign investment confidence; second, China's foreign trade continues to be strong, and the balance of payments The surplus has widened; third, China's financial market has opened up wider to the outside world, and RMB assets have been increasingly attractive to the outside world.

　　Tan Yaling, an independent economist at the China Foreign Exchange Investment Research Institute, pointed out that the appreciation of the renminbi has an important relationship with the domestic Winter Olympics and the increase in the utilization rate of international payments. In particular, access to China's bond market, thereby driving the appreciation of the RMB.

　　Wang Youxin, a senior researcher at the Bank of China Research Institute, pointed out in the research report that with the intensification of the conflict between Russia and Ukraine recently, the volatility of the international foreign exchange market has increased

In addition, the scale of foreign capital’s asset allocation to RMB equity and debt has continued to increase, and international institutions such as Credit Suisse, Goldman Sachs, HSBC and other international institutions have continued to promote more RMB assets, and the use of RMB in international reserves and cross-border payments has continued to increase. Recognition continues to increase.

How will the RMB perform later?

　　Since September 2021, the RMB exchange rate and the US dollar index have begun to deviate significantly, out of a market where the US dollar is stronger and the RMB is stronger.

In December 2021, the central bank announced that it will raise the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points from December 15, 2021.

　　At that time, CITIC Securities pointed out that the central bank stopped taking action after the rapid appreciation of the RMB, which further released the signal that the policy layer will continue to strengthen the management of exchange rate expectations.

　　How will the RMB exchange rate go in the future?

Tan Yaling believes that if the market environment is relatively comfortable, the late performance of the RMB is expected to be normal.

The U.S. dollar index tends to appreciate, and there is less pressure on the appreciation of the RMB in the short term. At present, the risk aversion of the U.S. dollar is higher.

Recently, oil and gold are on the rise, so dollar assets, the dollar exchange rate, including the U.S. stock market, are more likely to rise.

　　In Fan Ruoying's view, the escalation of the Russian-Ukrainian conflict has had a negative impact on the global economic recovery, rising uncertainty in the future, and heightened risk aversion in the market, which has accelerated the flow of funds to safe-haven assets such as U.S. bonds, pushed the dollar to appreciate, and brought currency to emerging markets. certain depreciation pressure.

Fan Ruoying further pointed out that in recent years, the risk-averse nature of RMB assets has been continuously enhanced, and

　　Looking forward to the market outlook, Fan Ruoying emphasized that it is also necessary to pay close attention to the pace of the Fed's tightening of monetary policy and changes in the interest rate gap between China and the United States, which may bring some depreciation pressure to the RMB.

Foreign trade enterprises should raise awareness of exchange rate hedging

　　The market generally believes that there is still pressure to appreciate the RMB in the short term.

Fan Ruoying pointed out that this may weaken China's export advantages and reduce the profit margins of China's foreign trade enterprises.

　　"The appreciation of the renminbi is an unfavorable factor for export and foreign trade companies." Tan Yaling said that China is a strong export and foreign trade country. For export and foreign trade companies, the appreciation of the renminbi means that the dollar earned back can be converted into less renminbi.

　　For importing enterprises, Tan Yaling pointed out that the appreciation of the RMB is more favorable for importing foreign exchange, but the rising prices of raw materials and commodities offset the favorable conditions for purchasing foreign exchange.

She believes that the appreciation of the renminbi is a negative factor for the real economy and for import and export foreign trade enterprises, and generally speaking, the harm outweighs the benefit.

　　However, she mentioned that after the foreign trade enterprises experienced the test of the large appreciation of the RMB last year, the medium and long-term planning measures and countermeasures have also matured.

　　Chinese Ministry of Commerce spokesman Gao Feng said at a regular press conference held on the 24th that exchange rate changes have a multi-dimensional impact on the production and operation of China's foreign trade and economic enterprises, which are related to bargaining power, cost-effectiveness and other aspects.

　　Gao Feng said that in recent years, the two-way fluctuation of the RMB exchange rate has increased, and the Ministry of Commerce, together with relevant departments, has taken various measures to help enterprises effectively improve their awareness and ability to hedge against exchange rate risks.

He mentioned that, according to the statistics of the State Administration of Foreign Exchange, the hedging ratio of enterprises in 2021 will increase by 4.6 percentage points year-on-year, indicating that enterprises' awareness of exchange rate risk aversion is gradually increasing.

(Sino-Singapore Jingwei APP)

(The opinions in this article are for reference only and do not constitute investment advice. Investment is risky, and you need to be cautious when entering the market.)

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