RMB 26 Trading Days 22 Time Limit Monetary Policy Shift Dilemma

November 29th, interbank market RMB The spot exchange rate against the US dollar once again hit the upper limit of the 1% trading range, which is the twenty-second "limit" that has been set in the last 26 trading days.

Just a year ago, the renminbi's spot rate against the US dollar had "closed down" for 12 consecutive trading days.

However, RMB rate From the devaluation of haze to the reversal of successive "trading", there are no signs that "hot money" is accelerating. It is also interesting to note that unlike the previous RMB appreciation stage, the central bank continued to purchase foreign exchange to stabilize exchange rate in the market. The difference was that although the central bank remained basically stable during the appreciation, it rarely intervened in the market.

Faced with the embarrassing situation of inter-bank foreign exchange market, there is no difficulty in the market, and commercial banks are not so calm as the central bank. Some banks break through 1% of the upper and lower trading ranges of the interbank market by adjusting the quotations for the foreign exchange and sale of the clients, adjusting the demand for foreign exchange settlement, and some banks effectively circumvent the trading limit through short-term RMB forward trading.

However, these are not long-term solutions to the "failure" in the foreign exchange market. From the side of the central bank, the intervention in the foreign exchange market has led to a weak growth in the basic money supply. On the one hand, in the open market, the reverse repurchase operation will release liquidity. The purpose of the central bank may be to improve the independence of monetary policy. However, in the face of worries about the suspension of bank and enterprise settlement, the tight liquidity among banks and the increasing macroeconomic and financial risks, it is still time to test whether the central bank can smoothly shift gears.

　　 No support for "hot money inflow"

The change in the value of the renminbi from devaluation to appreciation is quite sudden, and the rate of appreciation is faster than expected. A state-owned big trader said, "in July, customers also expected that the renminbi would continue to depreciate and suddenly appreciated in August. If we say that the appreciation in 8 and September is the QE3 effect, but after entering October, the rise of the US dollar will also rise. This is not QE3's explanation. Seeing this situation, the market is a bit panic. The number of clients has increased significantly, and banks are also throwing dollars, and the rate of appreciation has accelerated rapidly.

In mid August of this year, after the central parity reached a 6.3495 year low, the RMB exchange rate quietly returned to the appreciation track from the end of August. It was not until mid October that there was frequent "limit". The rate of appreciation has obviously accelerated since then.

Since October 25th, for the first time since the "limit", the spot exchange rate of RMB against the US dollar has risen from 6.24 to 6.22, with a total appreciation of about 0.4%, and the intermediate price rose from 6.3047 to 6.2910 in November 29th, with a total appreciation of about 0.2%.

For the accelerated appreciation of the renminbi, many analysts interpreted it as the negative effect of the QE3 launched by the Federal Reserve in September, that is, the re entry of hot money. However, the stock market dropped to 2000 below the 2125 point when the Federal Reserve announced the QE3, and the property market is still subject to various regulatory policies, which do not support the "hot money" inflow.

Nor did the data show that hot money is accelerating. According to the situation of foreign exchange sales in October, although the favorable balance increased, the exchange rate of banks on behalf of clients decreased by 9.1%, and the ratio of sales to foreign exchange decreased by 10.6%. The decrease in sales volume was greater than the decrease in settlement, resulting in an increase in net settlement and a long-term deficit in forward sales and sales in October.

From the perspective of cross-border revenue and expenditure, domestic bank's foreign-related income has decreased by 4.9%, the expenditure has decreased by 6.3% compared to the previous month, and the balance of payments has been $5 billion 300 million, which has been running out for two consecutive months, of which the mainland continues to maintain a net outflow of funds to Hongkong.

"The October statistics do not support the current significant increase in cross border capital inflow pressure in China." The head of the State Administration of foreign exchange said in a press interview on November 21st.

In addition, since October, a number of banks have lowered the interest rate of small foreign currency deposits. The minimum interest rate for us dollar deposits adjusted after 1 years is only 0.70%. This may also be one of the factors that push customers to speed up the settlement of foreign exchange.

The US dollar supply suddenly increased, and the largest demand side, the central bank, no longer appeared, resulting in extreme imbalance in market supply and demand.

Banks have US dollar positions and must be flat, while the central bank no longer buys us dollars. But the central bank is still controlling the exchange rate through the middle price. At the end of last year, the "ten consecutive drop" of the renminbi was that the central bank had set the price of the RMB too high. Now, on the contrary, the central bank has set the price of the RMB too low, and the middle price of the day is much lower than the closing price of the previous day. As long as the central bank does not enter the market, this situation will continue.

　 Bank "self rescue" and "self-interest"

Traders are almost used to keeping the exchange rate closed for a long time. In the past 26 trading days, only four trading days, the big bank may be encouraged to buy dollars, the RMB exchange rate briefly opened "limit".

"(dollar) daily limit, the market is not mobile, do not bother to see." A foreign trader was "complaining".

Some small and medium-sized banks have fewer customers and more unilateral positions. Therefore, they have greater pressure on the flat market and can only suspend the settlement of foreign exchange. For the state-owned big banks, the relative pressure of flat sales is relatively small because of the relatively balanced sales of foreign exchange and sales.

In the case that the central parity and trading range of the RMB are still limited, banks are trying various ways to break through the restrictions. Some banks raise their quotations for foreign exchange through raising their customers' prices, such as the limit price is 6.2289, and the bank's quotation to customers is 6.2250.

"The bank's quotation to customers is more market-oriented than the inter-bank spot exchange rate, and it is also a self protection for banks. This is more common in big businesses. " The above state-owned big traders said.

At the same time, some banks have begun to use short-term renminbi forward trading to avoid restrictions on intra day trading. "The 1 day dollar / yuan forward transaction has rarely been done before, but recently it has done a lot. Because the spot market is settled after two days, and the 1 day forward transaction is settled after three days, so that the transaction can be concluded at a higher price than the RMB spot exchange rate. For example, the daily limit price is 6.2230, and the forward price may be 6.2220 or higher. The above foreign trader said.

In November 29th, the US dollar / RMB forward exchange rate started from 6.2200, which was 81 basis points lower than the spot limit price of 6.2281, and the lowest intraday long term reached 6.2030, that is, 256.4 points lower than the spot price limit. "Banks are returning customers, the actual profits have been smoothed or lost, but it is still possible that even if the drop in points is more, there is still no buying." The traders said.

In order to sell US dollars, another way for banks to try to achieve indirect exchange between the renminbi and the US dollar through the renminbi is against the non US dollar currencies, such as the euro, the yen and the Hong Kong dollar, because the floating range of the renminbi against these currencies is much larger.

Save yourself. Bank It is also using the renminbi to return to the trend of appreciation.

Recently, some banks have begun to become more and more popular with the large number of importing and paying customers in the arbitrage trading market. They are about to split up three pieces of import and export payment business. The customers first use the renminbi to purchase foreign exchange for banks, and then make a foreign exchange loan. At the same time, in order to lock in the exchange rate, they make a long-term foreign exchange purchase. "The bank has pulled the deposit, the customer manager has the achievement Commission, the enterprise also gains the benefit, it can be said that one stroke is many." A share trader recently revealed.

However, unlike the previous appreciation of the renminbi at the unilateral appreciation stage and the appreciation in the long term, the appreciation of the renminbi is appreciably at the same time, while the forward value has always been depreciated. The above transaction mode is no longer a risk free arbitrage.

"Although RMB deposit interest is still high and foreign currency financing interest rate is relatively low, now the long-term purchase of foreign exchange means that the future customers will have higher cost of purchasing foreign exchange, and the interest on RMB deposits is not enough to offset the loss of foreign currency financing interest and long-term purchase of foreign exchange. This is not cost-effective, but some banks will guide customers to do so in order to make big savings and loan businesses, and some banks will return the proceeds of forex purchase directly to enterprises in the form of financial expenses. A state-owned big bank official said. {page_break}

　 Will the exchange rate return to the "dual track system"?

Since the RMB exchange rate returned to its appreciation track in late August, foreign exchange holdings have not rebounded sharply, especially the central bank's foreign exchange holdings are still at a low level.

Zhang Bin, a researcher at the Institute of economics of the Academy of Social Sciences, pointed out that the changes in the central bank's foreign exchange accounted for the size of the central bank's intervention in the foreign exchange market. From the beginning of 2003 to September 2011, the central bank bought an average of 207 billion 500 million yuan in the foreign exchange market every month, and the average monthly net intervention of the central bank in the foreign exchange market was only 10 billion yuan equivalent to the US dollar from October 2011 to August 2012. This shows that the central bank's intervention in the foreign exchange market has seen a downward trend.

In recent months, the amount of foreign exchange purchased by the central bank in the market is much smaller than that of other financial institutions. In September, all financial institutions increased their foreign exchange holdings by 130 billion 700 million yuan, but the central bank's foreign exchange increased only by 2 billion 40 million yuan. In October, all foreign exchange funds of financial institutions increased by 21 billion 625 million yuan, and the central bank's foreign exchange increased by only 1 billion 84 million yuan, which was half the increment in September.

"If the central bank does not intervene, its foreign exchange reserves and basic money supply will not increase, and it can only be supplied by reverse repurchase." Xie Yaxuan, director of macroeconomic research at 8.30,0.08,0.97%, R & D center, said Mr. Xie Yaxuan.

On the one hand, we should reduce foreign exchange market intervention and reduce passive base money. On the one hand, we should normalize the reverse repurchase operation and actively regulate market liquidity. The central bank's monetary policy regulation since the second half of this year will undoubtedly show more independent stance.

Zhang Bin believes that in order to maintain exchange rate stability, the monetary authorities have intervened in the foreign exchange market for many years, resulting in the corresponding large amount of basic money put into the source of macroeconomic overheating and rising prices. The interest rate policy of the monetary authorities has also been severely restricted.

The pressure on the renminbi to face appreciation again is to reduce the intervention to allow the yuan to fluctuate more sharply, or to continue to intervene heavily in the market as it did in the past and to seek stability in the exchange rate, thus testing the wisdom of policymakers.

"A good system is not easy to come by. If the exchange rate reform mechanism is implemented again because of the huge intervention of the gains and losses, it is still empty talk. We should give more confidence to the market and believe that the fundamentals of the market will adjust the RMB exchange rate to a reasonable level in the medium to long term. Zhang Binxu said.

From now on, the central bank is still "sticking to" and not interfering. However, at the same time, the frequent "unlimited trading" of RMB brought about by the stability of the intermediate price has become an unbearable burden for the market, and it may also lead to a return to the "dual track system".

CICC pointed out that in the short term, the higher trade surplus, the continued inflow of FDI and the slow economic recovery in Europe and the United States make the market demand for foreign exchange difficult to decline. If the central bank does not intervene through the initiative to purchase foreign exchange, and the reverse repurchase will increase interbank liquidity, then the RMB market interest rate will be maintained at a high level in the short term. Higher interest rate earnings will further push up the RMB, which is not conducive to economic recovery, and will enhance the asset liability ratio of the whole society and increase the debt risk in the long run.

It is not yet known whether the central bank will go ahead in the future, whether it is to withstand pressure, maintain monetary policy independence or return to intervention. But no matter whether the central bank chooses to intervene, it will not affect the basic trend of RMB exchange rate going upward in the fourth quarter. " Xie Yaxuan said.