RMB Exchange Rate Rises Or Falls Is A Normal Phenomenon.

< p > from the perspective of international financial history, no matter what exchange rate regime is adopted, there is no currency that only rises or falls.

In particular, the more market-oriented the exchange rate is, the more flexible the exchange rate regime is, and the greater the exchange rate flexibility.

After the war, with the economic take-off, yen and mark became strong currencies in the world.

However, after the collapse of the Bretton Woods system in early 1970s, yen and Mark experienced ups and downs in the long term trend of appreciation.

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Before P was merged into the 1994, the RMB was a weak currency. The official exchange rate was 1.58 yuan against the initial 1 dollars in the initial stage of reform and opening up, and it was devalued to 5.80 yuan on the eve of the merger.

After the merger, the RMB exchange rate began to turn stronger. Especially during the Asian financial crisis, China promised that the renminbi would not depreciate and gradually established the international position of RMB's emerging strong currency.

From the beginning of 1994 to the end of 2013, the central parity of the RMB against the US dollar appreciated by 43%. The nominal and real effective exchange rate (that is, the multilateral exchange rate of the average exchange rate of the RMB relative to the main trading partners) was increased by 55% and 81% respectively.

In the 61 currencies monitored by the BIS, the nominal and real effective exchange rates rose by fourth and eighth respectively.

Among them, since the reunification in July 2005, the central parity of RMB against the US dollar has risen by 36%, while nominal and real effective exchange rates have appreciated by 32% and 42% respectively. The latter two ranked the first and second places of the Bank of international settlements to monitor currencies.

Over the past twenty years, the bilateral and multilateral exchange rates of RMB have been strong, and gradually formed and strengthened the inevitable impression of the long term appreciation of the RMB exchange rate.

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Since the middle of February 2014, the RMB exchange rate has begun to decline since the middle of February 2014.

However, in the first quarter, the central parity of the RMB against the US dollar dropped by only 0.9%, while the domestic Renminbi traded against the US dollar (CNY) by 2.6%, while the foreign exchange rate of RMB against the US dollar (i.e. CNH) fell by 2.2%.

Over the same period, the nominal and real effective exchange rates of RMB declined by only 1.4% and 1.1% respectively.

This adjustment is not much more than the increase in the past twenty years.

In addition, the JP Morgan emerging market monetary index shows that the average value of the main emerging market currencies has depreciated by 8.2% at the end of 3 in early 2013, and the central parity of the RMB against the US dollar has appreciated by 2.5% during the same period. It also shows that the adjustment of the RMB exchange rate is limited in the same period of 2014.

At the end of 3, the implied volatility of the RMB exchange rate reflected in the options market within 6 months was only about 2.5%, which is still far below the average fluctuation rate of 9.5% in the 24 major developed and emerging market currencies over the same period.

It is generally believed that if the stock index rises or falls by 20%, it can only be called a bull market or bear market.

The short-term fluctuation of the RMB exchange rate should not be overinterpreted, nor should it be changed to China's exchange rate policy.

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In recent years, on the one hand, the RMB exchange rate tends to be balanced and reasonable, which has further promoted the balance of payments, especially the current account balance. On the other hand, China has seized the favorable opportunity of balancing the balance of payments and further accelerated the marketization of the RMB exchange rate in P.

By the end of 2013, in the third Plenary Session of the 18th CPC Central Committee, it was clear that we should play the decisive role of market allocation of resources and "improve the formation mechanism of RMB exchange rate marketization".

At the beginning of 2014, the government work report further pointed out that we should "maintain the basic stability of the RMB exchange rate at a reasonable and balanced level and expand the two-way floating range of exchange rates".

Therefore, understanding the recent fluctuation of RMB exchange rate can not only look at its horizontal change in isolation, but also combine with the central bank's two-way fluctuation of RMB exchange rate and the expansion of exchange rate floating range.

This is a big step towards the correct direction of implementing the spirit of the the third Plenary Session of the 18th CPC Central Committee, improving the financial market system and building a new open economic system.

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< p > capital flow has more and more influence on the balance of payments, and also makes the RMB exchange rate have a two-way fluctuation of the micro market basis.

Since the crisis, China's current account income and expenditure has tended to improve, while the increase in foreign exchange reserves has remained high.

There are both domestic institutional mechanisms for capital outflows and the spillover effects of macroeconomic policies in developed economies.

After the crisis, the major developed economies of the United States, Europe and Japan adopted the quantitative easing monetary policy, resulting in low interest rates and wide liquidity in the world, which made emerging economies often face the impact of capital flow fluctuations away from their basic fundamentals, and China is also deeply affected by them.

Between 2005 and 2009, the contribution of current account and capital account surplus to China's balance of payments surplus was 73.

Since then, except for a small deficit in capital account in 2012, the contribution of current account and capital account surplus to the balance of payments surplus in 2010, 2011 and 2013 has changed to 46. That is, capital account has exceeded current account and has become the main source of China's favorable balance of payments and the increase of foreign exchange reserves.

In 2013, the ratio was 36%: 64%.

Among them, because domestic enterprises adopt the financial operation of "assets in local currency, liabilities in foreign currencies" or "do more Renminbi and short foreign currencies", the capital flows of China's < a href= "http://www.91se91.com/news/index_cj.asp" > non direct investment < /a > in 2013, that is, the two items of investment in the balance of payments and other investments, turned from a net outflow of US $212 billion 300 million last year to a net inflow of US $138 billion 200 million, and the amplitude of this increase amounted to US $350 billion 500 million, which fully explained the increase of China's foreign exchange reserve assets by 334 billion US dollars in that year.

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< p > especially, although the spot exchange rate of the 2013 a href= "http://www.91se91.com/news/index_cj.asp" > /a > US dollar showed an appreciation trend, the renminbi depreciated against the US dollar in the forward market, which reflected the situation that the RMB interest rate was higher than the US dollar interest rate.

Compared with the appreciation period of RMB in the past, the market now has a higher appreciation pressure but no appreciable appreciation expectation, and the market environment has undergone tremendous changes.

In the first 2 months of 2014, the forward balance of foreign exchange settlement and sale reached a historical record, because when the RMB forward exchange rate depreciated and the a href= "http://www.91se91.com/news/index_cj.asp" > spot exchange rate was less than /a > stable conditions, the enterprises chose to make long-term settlement of foreign exchange more attractive in financial affairs.

The risk-free arbitrage activities that took advantage of the spread of foreign currency spreads, distant spot remittance and domestic and foreign spreads were unprecedentedly active. In the first quarter of 2014, when the current account surplus was only 7 billion 200 million US dollars, the capital account surplus still amounted to US $118 billion 300 million, excluding foreign exchange reserve assets such as exchange rate and asset price changes, the foreign exchange reserve assets increased by US $125 billion 800 million.

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< p > when the impact of capital flows on the balance of payments is increased, market supply and demand is only an important factor affecting the trend of exchange rate, but not the only factor.

In this case, the exchange rate will be more and more deviated from the commodity attribute, and more like assets and price attributes such as stocks and bonds, psychological expectations, price revaluation and other non flow and non paction factors will increase the exchange rate.

If the exchange rate of the US dollar fluctuated freely, the demand and supply of US dollar in the global market were basically balanced, but the US dollar exchange rate still rose or fell.

Its appreciation must not simply be explained by capital inflows, and the depreciation must not be simply explained by the trade deficit, because the balance of payments structure of the United States itself is a combination of current account deficit and capital account surplus.

At each time point, the exchange rate of the US dollar to the major currencies is the short-term equilibrium exchange rate generated by market clearing.

There are fundamental and non fundamental factors affecting the exchange rate of the US dollar, both economic and non economic factors, both trade and financial factors, both domestic and international.

Some factors coexist for a long time, but in different periods, different factors have different effects on the US dollar exchange rate trend, causing the US dollar exchange rate to fluctuate in the short run.

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