Two-way fluctuations in the exchange rate of Renminbi against the U.S. dollar have become the norm-

Market players must not bet on the appreciation or devaluation of the renminbi

Our reporter Yao Jin Guo Ziyuan

  6.38, 6.40, 6.42...Data from the China Foreign Exchange Trading Center showed that the central parity of the RMB to US dollar exchange rate on June 17 was quoted at 6.4298, a decrease of 220 basis points from the previous trading day.

  Since the beginning of this year, the two-way fluctuations in the exchange rate of the RMB against the US dollar have become more pronounced.

From the beginning of this year to February, the central parity of the renminbi against the US dollar showed a clear appreciation trend; after the appreciation reached a high point on February 10, it began to show a depreciation trend until it reached a low point of 6.5713 on March 31; since April, the renminbi has The central parity rate against the US dollar showed a trend of volatility and appreciation. This trend continued into May and reached a high of 6.3572 on June 1st, after which it fluctuated downward.

  In May, the RMB exchange rate experienced a sustained and rapid appreciation trend, with a certain degree of overshoot, which had an impact on the market, especially the steady operation of foreign trade companies.

To this end, the regulatory authorities have repeatedly voiced, emphasizing that "two-way fluctuations are the norm" and "resolutely combat various malicious manipulation of the market and malicious creation of unilateral expectations", and introduced some targeted measures to stabilize and guide market expectations.

  In an environment where exchange rates fluctuate in both directions, how should companies respond?

On June 16, the foreign exchange market self-discipline mechanism once again emphasized that the future trend of the RMB exchange rate faces greater uncertainty.

Under the market-oriented exchange rate formation mechanism, the exchange rate may either appreciate or depreciate, and two-way fluctuations will be the norm.

  Market participants generally believe that market entities should adapt to the normal state of exchange rate fluctuations, establish a "risk-neutral" exchange rate concept, actively implement hedging, and do not bet on RMB appreciation or devaluation.

  "From historical experience and the impact of the last round of Fed withdrawal from unconventional policies, it will have some impact on emerging economies." Zhou Maohua, an analyst at the Financial Markets Department of China Everbright Bank, believes that once the Fed tightens its policy or the U.S. dollar rises, it will lead to global The U.S. dollar returns to the U.S. market, and some emerging economies face the risk of contraction in the monetary and financial environment.

  Zeng Gang, deputy director of the National Finance and Development Laboratory and director of the Shanghai Finance and Development Laboratory, also said that companies must maintain the principle of "risk neutrality" and strengthen risk prevention.

"The process of the Fed's balance sheet reduction is a process of rising risks in the financial system. Enterprises should not bet on the depreciation or appreciation of the U.S. dollar. Instead, they should do a good job in hedging and reduce exchange rate risks as much as possible." Zeng Gang said.

  “The minutes of the Fed’s meeting on June 17 show that the United States will raise interest rates twice before the end of 2023. Although the Fed will have a long time to tighten monetary policy, the market’s advance pricing has already begun.” said Dong Ximiao, chief researcher of China Merchants Union Financial. The US monetary policy is still uncertain, and there are multiple unstable factors in the external environment that affect exchange rate changes.

Market entities should establish and adhere to the concept of "risk neutrality", adapt to the normal state of exchange rate fluctuations, strengthen risk management and response to exchange rate fluctuations, and minimize the negative impact of exchange rate fluctuations on daily operation management and performance indicators.

  Our reporter Yao Jin Guo Ziyuan