Currency Observation: The Current RMB Devaluation Market Will End.

Last week, the spot exchange rate dropped 1.2%, setting the biggest weekly decline since 2005. The most direct reason is related to the recent decision by the central bank to increase the volatility of the RMB exchange rate.

The central bank has intervened in the market since the end of 2. It is said that it has bought $25 billion, resulting in a 2.8% decline in the yuan against the US dollar this year, almost all the gains of last year. The RMB exchange rate has been rising steadily over the past ten years, but now it has entered a rare stage of weak trend.

　　 Central Bank The intervention is to adapt to the current economic situation in China, for example. China's economy The slowdown, the continuous narrowing of China's export growth and the easing of the US dollar withdrawal are also aimed at combating the large amount of speculative capital on the unilateral appreciation of the renminbi, so as to promote the marketization of the RMB exchange rate in a more favorable environment. At the same time, it also means creating conditions for China's foreign trade export.

In the past month, not only the US dollar financial products were 2 percentage points higher than the renminbi financial gain. What is more serious is that the RMB has fallen below the critical point of 6.2 yuan against the US dollar, which may trigger. Investment products An additional margin account may lead to a more unstable RMB exchange rate. These investment products were sold at the US dollar exchange rate below RMB 6.2 yuan, when the market generally expected that the renminbi would maintain its unilateral appreciation. Most of the structural products that buy these problems are Chinese exporters, hoping to hedge against the exchange rate risks faced by US dollar earnings. In other words, many export enterprises have to participate in speculative speculation in the unilateral appreciation of the RMB exchange rate during the difficult period of export business.

Deutsche Bank and Morgan Stanley estimated that at least $350 billion TRF has been sold since last year. TRF similar option contracts are designed to hedge exchange rate risk. If the US dollar remains above the strike price, the holder can gain additional profits from commercial hedging. Now that the RMB has continued to depreciate, most of the hedge funds have gained huge profits in the unilateral appreciation since 2005. It has been estimated that the loss of the product has risen to $3 billion over the past week.

The purpose of the central bank's attack on international speculative capital to bet on the unilateral appreciation of the renminbi can basically be achieved, and the environment that is more conducive to promoting the marketization of the RMB exchange rate is relatively formed. Continuing to depreciate is not only good for me, but may cause international pressure. On Saturday, Yi Gang, vice president and foreign exchange bureau of the central bank, said that the exchange rate will be determined by the market from an increasing degree, and that the central bank's intervention in the market will gradually weaken. Combined with last Friday and yesterday's RMB exchange rate market outlook, this round of depreciation of the renminbi market will be over.

What will happen to the RMB exchange rate in the future? Although some people think that the RMB will continue to depreciate, I think the basic trend of RMB will appreciate in the future. Therefore, the basic trend of long-term appreciation of RMB remains. The central bank will expand the fluctuation range of the RMB exchange rate. In the future, the trend of the RMB exchange rate is likely to be a steady appreciation under the market decision, without significant depreciation or substantial appreciation.