Since June this year, the RMB has started a round of rapid appreciation, and the offshore exchange rate has risen by more than 5,300 basis points.
In this context, the China Foreign Exchange Trading Center announced on October 27 that recently some banks that quoted the central parity rate of RMB against the U.S. dollar, based on their own judgments on economic fundamentals and market conditions, have taken the initiative to refer to the " "Countercyclical factor" fades out to use.
"Countercyclical factor" was launched in August 2018, and it has been 26 months.
According to the announcement, since the beginning of this year, my country's foreign exchange market has been operating steadily, the international balance of payments has tended to balance, and the RMB exchange rate has been floating in both directions on the basis of market supply and demand, with increased flexibility.
The adjusted quotation model is conducive to improving the transparency, benchmarking and effectiveness of the mid-price quotations of quotation banks, and it is also a manifestation of the role of market entities in the self-regulation mechanism of the foreign exchange market.
What is a "countercyclic factor"?
Public information shows that in May 2017, the core members of the foreign exchange market self-discipline mechanism adjusted the quotation model of the central parity rate of the RMB to the US dollar exchange rate from the original "closing price + a basket of currency exchange rate changes" to "closing price + a basket of currencies" based on market principles. Exchange rate changes + countercyclical factors".
The background at that time was that the RMB exchange rate against the US dollar continued to depreciate, and the introduction of "countercyclical factors" effectively alleviated the procyclical behavior of the market and stabilized market expectations.
In January 2018, as my country's cross-border capital flows and foreign exchange supply and demand tended to balance, the quotation bank of the central parity rate of the RMB exchange rate against the US dollar successively adjusted the "counter-cyclical factor" to neutral.
The effect of this adjustment tool is very effective.
Wind data shows that between May 2017 and January 2018, the central parity of the RMB against the US dollar rose from around 6.86 to around 6.41, an appreciation of about 6.5%.
However, with the influence of factors such as trade frictions and the appreciation of the U.S. dollar, the exchange rate of the RMB has fluctuated significantly.
In August 2018, the offshore RMB exchange rate against the U.S. dollar fell below 6.95 for a while, approaching an important mark of 7.
In the same month, the quotation bank of the central parity rate of the renminbi against the US dollar restarted the "countercyclical factor", once again releasing a stable signal to the market.
This time after 26 months, the "countercyclical factor" of central parity quotations has faded out, which is another round of rapid appreciation of the RMB exchange rate this year.
According to Wind data, on May 27, the offshore renminbi exchange rate began to "counterattack" from a year low of 7.1765, and rose to a high of 6.64 on October 21, a cumulative increase of more than 5,300 points, an increase of 7.4%.
"It is normal for the RMB exchange rate to appreciate under the promotion of market supply and demand. It is due to the fact that market supply and demand play a decisive role in the formation of the exchange rate under a managed floating exchange rate system." Sun Guofeng, Director of the Monetary Policy Department of the Central Bank, recently announced in the Central Bank. It was stated at the meeting that my country took the lead in controlling the epidemic, and economic and social development has resumed. The International Monetary Fund predicts that my country will be the only major economy that will achieve positive economic growth this year.
Coupled with the good export situation, long-term foreign capital, including central banks, has flowed into RMB assets in an orderly manner.
It is worth mentioning that another countercyclical adjustment tool related to the phased trend of the RMB exchange rate-the foreign exchange risk reserve ratio for forward foreign exchange sales business was lowered to zero again on October 12 not long ago.
The tool has also undergone several adjustments since its debut in 2015.
Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, stated at a press conference of the State Council Information Office on the 23rd that under the combined effect of internal and external factors, the future RMB exchange rate is expected to maintain two-way fluctuations and basic stability at a reasonable and balanced level.
Cheng Weimiao, reporter of Beijing News Shell Finance