Interpretation Of The Central Bank'S Expansion Of The RMB Exchange Rate Volatility

< p > < strong > (1) highlights the determination of a href= "http://www.91se91.com/news/index_c.asp" and "central bank /a" to continuously push forward the reform of the exchange rate system < /strong > /p >

< p > since the launching of the RMB exchange rate system reform in July 2005, the people's Bank of China [micro-blog] has always adhered to the market-oriented and gradual reform direction, which not only promotes the marketization of exchange rate, but also controls the timing, intensity and rhythm of the reform, prevents the impact of the fluctuation of the exchange rate on the economic operation, and finally constructs an effective exchange rate mechanism that truly reflects changes in the market supply and demand.

From the real situation, over the past 8 years since the reform of the exchange rate, the RMB has abandoned the peg to the US dollar instead of paying attention to the change in the value of the basket of currencies. The appreciation of the renminbi is more in line with the fundamentals of the economy. In the international market, the sound of the RMB has been seriously undervalued, and the exchange rate of RMB has reached a consensus.

But at the same time, the RMB exchange rate deviated from the fundamental changes in the first half of 2013 and the movement of cross-border funds in 2013 also reflected that the RMB exchange rate formation mechanism needs to be further improved.

As mentioned earlier, this is the third expansion of the RMB exchange rate volatility since the reform. It highlights the central bank's determination to push forward the RMB exchange rate reform. It reflects that the central bank should comply with the requirements of market development, increase the market's determination of exchange rate, enhance the floating elasticity of RMB exchange rate, and further establish a managed floating exchange rate system based on market supply and demand.

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< p > < strong > (two) the central bank basically withdrew from normal form < a href= "http://www.91se91.com/news/index_c.asp > > foreign exchange < /a > intervening to leave room for monetary policy flexible space < /strong > /p >

< p > the central bank clearly stated in the reporter's question on expanding the floating rate of RMB exchange rate that the next step will basically exit normal foreign exchange intervention and establish a managed floating exchange rate system based on market supply and demand.

This creates a more flexible space for exchange rate policy, and brings greater room for monetary policy to help further improve the independence and effectiveness of monetary policy.

At the same time, as the central bank really withdraw from normal foreign exchange intervention, China's currency issuing mechanism of "Chinese style" issuing foreign currency as an important channel has changed over the years, and the role of foreign exchange as the channel of money creation will gradually weaken.

However, the central bank also said that if the exchange rate fluctuates exceptions, it will implement the necessary regulation and management to maintain the normal fluctuation of the RMB exchange rate.

It also declared to the market that the central bank reserves the right to intervene and regulate the RMB exchange rate in the process of RMB exchange rate liberalization.

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< p > < strong > (three) the policy measures should not be overinterpreted. < /strong > < /p >

Historical data on foreign exchange pactions in the international market show that free floating and unrestricted currencies rarely rise or fall by more than 1% in the dollar within a day.

Even the euro dollar versus the US dollar, which has a relatively large fluctuation, is extremely rare in the past 14 years. The single day rise and fall of more than 2% in the trading records is extremely rare.

From the domestic interbank market trading situation, since the April 2012 RMB exchange rate volatility increased from 0.5% to 1% in the past two years, the a href= "http://www.91se91.com/news/index_c.asp" > RMB /a > exchange rate trading day also barely touched the 1% ceiling.

Even in February, when the yuan weakened significantly, the fluctuation rate increased significantly, and the average daily volatility of the RMB exchange rate was less than 0.3%. On February 28th, the RMB exchange rate reached the highest level, and the daily fluctuation rate did not reach 1%.

To some extent, the expansion of the RMB's exchange rate to 2% is basically equivalent to allowing it to float freely.

Therefore, the policy measures to expand the volatility of the RMB exchange rate will have relatively limited impact on the fluctuation of RMB exchange rate in the future.

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< p > overall, the exchange rate policy is slightly thinner than that of the central bank in April 2012.

Relative to the fluctuation of exchange rate, as the benchmark of interbank spot foreign exchange market and bank counter trading, the central parity of RMB exchange rate and other currencies announced by China foreign exchange trading center has a more important role in determining the trend of RMB exchange rate.

Under the condition that the intermediate price formation mechanism remains unchanged, expanding the amplitude will help to fully reflect market expectations, but has little effect on the central spot of the RMB spot exchange rate fluctuations.

From this perspective, the formation of a more perfect central parity mechanism for RMB exchange rate is more important for the reform of RMB exchange rate system.

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< p > if this goal can not be realized, the elasticity of exchange rate will not only increase without amplifying the fluctuation interval, but will strengthen the unilateral expectation of the market, resulting in overshoot of exchange rate and adverse effects on the real economy, and will also increase the risk of cross-border capital movements.

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