RMB Rebounded Strongly On Monday, Short Term RMB Continued To Depreciate.

After the biggest weekly decline in history, the spot rate of RMB against the US dollar rebounded on Monday (March 24th).

Many analysts told reporters that, first of all, less than expected economic data may have been digested by the market ahead of time; secondly, after last week's significant devaluation, the RMB rebound is normal revision. The central bank [micro-blog] must have a bottom line for the depreciation of the renminbi, but it is hard to say where the specific bottom line is. The short-term RMB exchange rate should continue to depreciate.

According to the statistics of reporters, the Renminbi (RMB) against the US dollar (spot price) has devalued more than 1.2% last week, the largest weekly decline in history, and the lowest exchange rate in 1 years to 6.2370. From January 14th of this year, as of last Friday (March 21st), the spot exchange rate of RMB against the US dollar (enquiry) has depreciated by 3% (1816 points) with an amplitude of 3.25%.

"Recently, the renminbi has fallen too fast, and everyone is holding long positions. Some people feel that the price is too high and a large amount of foreign exchange has started at the end of the market." A joint-stock bank in Shanghai foreign exchange The trader said.

China's foreign exchange center data show that the central parity of RMB against the US dollar increased 23 points on Monday, at 6.1452. The RMB against the US dollar spot exchange rate (enquiry) also slightly opened, soon after the opening fell to 6.2231, followed by the cold market, the exchange rate remained narrow in a narrow range; around 3 p.m., the exchange rate began to rebound significantly, after 3:30 p.m. rebound began to accelerate, up to 6.1882, and closed up 362 points (about 0.58%) to 6.1888.

Meanwhile, the HSBC China Manufacturing Purchasing Managers' index (PMI) preview released by HSBC on Monday showed that the PMI initial value data in March dropped to 48.1, the lowest since July last year, and the three consecutive month was below the ups and downs line, the final value last month was 48.5.

In this regard, China Merchants Bank head office financial market Senior analyst Liu Dongliang [micro-blog] told reporters that after last week's significant devaluation, the RMB exchange rate rebounded, which should be a normal correction. In fact, the market does not necessarily respond to the fundamentals in a very timely manner, especially if it does not necessarily correspond to the economic data published daily. In addition, before the announcement of the economic data, the market will have an expectation that it may digest ahead of time, so that the impact will be very small after the announcement.

"In fact, in the short run, RMB The relationship between exchange rate fluctuations and economic data is not too large, at least from a historical perspective. Chen Long, a financial analyst at Dongguan bank, told reporters that this should be a technical rebound to a large extent.

In the future, the yuan will continue to depreciate, Liu Dongliang said. Considering that China's economic weakness is still on the trend, the RMB exchange rate will continue to depreciate in the short term when the market maintains negative expectations for the Chinese economy.

"There must be a bottom line for the central bank to depreciate the renminbi, but it is hard to say where the specific bottom line is. Now we see that the depreciation of the renminbi is so much that the performance of the central bank is still relatively calm and has not intervened in the market orally or in any other way. Liu Dongliang also said that the most direct criterion for the central bank to determine whether the devaluation is in place should be whether it has triggered a panic of capital flight.

Arbitrage funds are generally six months or 1 years, but it is very difficult to distinguish between those funds and the real trade background from the end of the bank. We observed that after the fourth quarter of last year, these arbitrage funds tended to have a real trade background. Liu Dongliang added.

Chen Long also told reporters that with China's financial system, there are few arbitrage funds that can be squeezed out in the short term, but it can reduce the amount of money coming in. In February, the yuan began to depreciate considerably. The increase in foreign exchange holdings in that month dropped rapidly, and it is expected that it will continue to decline in March. Of course, if the RMB continues to depreciate, the latter will show more and more influence. By the 3 quarter, there will be a large negative value in the new foreign exchange occupation. If the exchange rate starts to move smoothly now, the short term operation will be squeezed out, leaving behind long-term capital and will generally enter the investment field of the real economy.