RMB Volatility Widened And Strengthened Signal Of Unilateral Appreciation.

In the form of Q & A, Merrill Lynch summed up the significance of the decision of the Central Bank of China, its impact on the exchange rate and the future trend of China's P reform.

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< p > > strong > 1, what information is pmitted by expanding the amplitude? < /strong > < /p >

< p > the Central Bank of China has issued a signal that the unilateral appreciation of the RMB has ended, and the expansion of the amplitude strengthened the signal.

It is estimated that the fluctuation of the RMB exchange rate against the US dollar will be even higher in the future.

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In the past two months, China's interbank "a href=" http://www.91se91.com/news/index_c.asp "market interest rate < /a > has been in line with the RMB exchange rate on the shore." Merrill Lynch believes that this is the plan and coordination of the Central Bank of China, aiming to get rid of the dilemma of last year's interest rate rise, the inflow of hot money and the rising of the RMB on the coast so that the Central Bank of China can face the dilemma. "P

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< p > > strong > 2, how about the market value of the RMB on the shore to the US dollar? < /strong > /p >

< p > Merrill Lynch believes that the consensus of Chinese policymakers is that the current RMB exchange rate against the US dollar (at 6.15 spot rate in March 14th) is very close to the equilibrium level, so there will be no trend of appreciation and depreciation in the near future.

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In the long run, the equilibrium value of the exchange rate will be determined by many factors, including the money supply of China and the United States and the inflation level of the two countries. P

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< p > < strong > 3, what action will the next step of the Chinese government's foreign exchange reform take place? < /strong > /p >

< p > it is expected that China's "a href=" http://www.91se91.com/news/index_c.asp "central bank /a" will not stop here, but further enlargement of volatility is almost meaningless, and more importantly, change the mechanism of setting the middle price of the RMB against the US dollar.

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Before P finally decides the exchange rate completely, Merrill Lynch expects that China's pition may be linked to a basket of currencies that are important to the trading partners.

Specifically, the Central Bank of China may favour Singapore's BBC mechanism, < /p >

"P > Merrill Lynch believes that such systems like BBC need to be more confident and pragmatic in the market.

Now the time is ripe, because the new leader who advocates market orientation has rapidly consolidated power, much faster than last year.

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< p > Wall Street notes: the full name of the BBC mechanism is Basket, Band and Crawling, that is, the exchange rate reference currency basket adjustment, fluctuates in a certain range, and the central exchange rate can be adjusted.

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What are the effects of < p > strong > 4 and expanding volatility on capital flow and growth? What are the effects on monetary mobility and economy? < /strong > /p >

< p > Merrill Lynch estimated that the fluctuation of the RMB on the shore dollar against the US dollar and the trend of no appreciation will lead to the diversion of hot money flowing into China, and perhaps some of the hot money flowing into the market will be withdrawn.

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< p > but China will not be very worried about that situation, because China has nearly $4 trillion in foreign reserves, with a deposit rate of 20% and a loan to deposit ratio of only 67%.

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< p > once the a href= "http://www.91se91.com/news/index_c.asp" > capital outflow < /a > threatens the stability of interbank liquidity and the supply of basic money, the Central Bank of China still has much room to reduce the deposit rate or purchase government bonds.

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Therefore, the Central Bank of China should pay close attention to the interbank market liquidity and interbank interest rates. P

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The widened volatility of RMB P released a strong signal to end the unilateral appreciation of the renminbi, which will benefit the Chinese exporters.

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When p announced the expansion last week, the central bank said expanding the floating zone is an important step to make the market a decisive factor in monetary value.

The reform of the RMB exchange rate is an important part of China's financial reform, which aims to strengthen the international status of the RMB, with a view to challenging the status of the dollar one day.

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< p > Wall Street investment bank generally believes that the central bank's move is expected to be an important step in exchange rate reform.

This will increase the volatility of exchange rate and combat the arbitrage trade, but there will be different opinions about the future of RMB.

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< p > China Securities Journal reported that after the Agency predicted that the central bank would guide the recent depreciation of exchange rate, it intended to pave the way for exchange rate reform. The central bank's action confirmed the prediction of this institution.

That is, the relationship between exchange rate and the causes and consequences of interest rates, it is hard to say that the central bank's monetary policy is relaxed.

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