Euro Zone QE Allows RMB To Go To "Crossroads"

Points to 0.15%; (2) the overnight interest rate (DF) interest rate from 0 to -0.1%; (3) the implementation of directional long term refinancing operation TLTROs, the financing period of 4 years, ending in September 2018, the scale of 400 billion euros, about April 30, 2014, the euro area to the non financial institutions stock loans 7%, will operate two phases in September 2014 and December respectively, the interest rate is MRO interest rate +10bp, the commercial bank can get the TLTRO quota equivalent to the net loan amount 3 times, starting from the beginning of each period of TLTRO begins to allow repayment; (twenty-fourth) extend the main fixed interest rate full financing operation, the interest rate is fixed to MRO, from July 2015 to the end of the year; < p > recently, the ECB launched a package of QE policies, including: (1) reducing the dominant refinancing rate (MRO) by 10 basis.

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< p > this marks the full participation of the European Central Bank in the "exchange rate war" war group.

From a direct trigger factor, it is mainly the euro area's lower than expected inflation level.

As the European Central Bank has made clear at the March Conference on interest rates, if inflation continues to be lower than expected and allows the European Central Bank to change its view of medium-term inflation, it will consider launching QE in June.

Euro area inflation once rebounded in April, but in May it was significantly lower than expected.

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< p > the fundamental driving factor is the strength of the euro.

Since the end of 2, the euro has continued to linger in the 1.38 line, or even at 1.40.

The strong euro has become one of the most important factors contributing to falling prices in the euro area, and has also played a significant role in inhibiting the euro zone economy.

That is why Delagi, the president of the European Central Bank, has repeatedly expressed concern over the negative impact of the strong euro on the European economy.

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< p > in order to avoid the flagrant outbreak of the global exchange rate war, the 2013 G7 conference and the G20 conference have agreed that no country can set the target level of its own currency, and adopt direct intervention measures or purchase foreign assets to achieve the goal. However, the domestic exchange rate changes caused by domestic policies based on the domestic economic situation are acceptable at any level.

Because of this, Japan, which focused on reducing its exchange rate, realized a sharp decline in the yen exchange rate through a large volume.

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Similar to P, the ECB's QE not only has the effect of lowering the euro exchange rate in terms of total volume and trend, but also implies the design of lowering the euro exchange rate in terms of policy portfolio.

For example, the interest rate of overnight deposit tools will be reduced to -0.1%.

The so-called overnight deposit tool is the excess reserve requirement deposited by commercial banks in the European Central Bank.

Previously, the interest rate was 0, which was down to -0.1%. The ECB's explanation in the official website Q & A is to maintain the width of the "interest rate corridor" between MRO and DF, and 25bp will not continue to be compressed.

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Compared with the 0 interest rate, the negative interest rate of the central bank's deposit will have a greater impact on the behavior of commercial banks. < p >

Faced with negative interest rates, commercial banks will reduce deposits as much as possible. The only way they can choose is: < /p >

< p > first, absorb less deposits.

In this sense, commercial banks will lower interest rates on deposits, which will reduce interest in holding euros and choose non euro assets; second, increase cash in stock.

Commercial banks retain more deposit cash; third, instead of holding non euro assets.

A large amount of cash is kept in stock. At the same time, because of the existence of the European Central Bank fixed rate full financing operation, it will not lead to liquidity risk. This will provide commercial banks with the opportunity to make use of cash in cash.

It is the general trend to find a high investment target with enough liquidity and large market capacity, so the US dollar will become the main market.

Therefore, this will make a large number of euro zone commercial banks instead of holding US dollar assets, which will drive up the US dollar exchange rate.

Conversely, the stronger the dollar, the more it will encourage the euro to be converted into US dollars.

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< p > euro zone QE allows RMB to go to "crossroads".

On the one hand, the QE of the European central bank means depreciation of the euro and appreciation of the US dollar in the trend.

The data analysis in our March 28th "intermediate price mystery" shows that the change in the central parity rate of the RMB is 70% against the US dollar, and the probability of 78% is the same as that of the euro.

According to this research result, it should correspond to the further depreciation of RMB against the US dollar.

On the other hand, there is another possibility that the euro will depreciate in the European debt crisis, but the yuan will continue to appreciate against the US dollar.

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< p > two directions are quite different.

If the renminbi is not less than a href= "http://www.91se91.com/news/index_c.asp" > depreciation "/a" (let alone appreciation), then the huge interest rate between China and foreign countries may make the RMB once again become one of the arbitrage targets of this part of the abundant liquidity.

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< p > this is very evident in the large modulus and depreciation of the previous a href= "http://www.91se91.com/news/index_c.asp" > Japanese yen < /a >.

Historical data show that: in early 2013, when the yen began to depreciate significantly, China's foreign exchange holdings changed to a single month in 2012, but it was even lower than that in some months. It suddenly appeared in January 2013 with a history of an unprecedented high of nearly 700 billion yuan per month. After that, the 2~4 month has also been over 200 billion yuan, although it has slowed down due to customs clearance after May 2013, but with the yen's devaluation again again in October, foreign exchange is coming back again.

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< p > RMB is beset by arbitrage.

Once the "a href=" http://www.91se91.com/news/index_c.asp "/a" does not depreciate and make itself a target of wide arbitrage of euros, there will be the following situations: < /p >

< p > first, foreign exchange accounts for a big increase again. The central bank's "external behavior" will have to be changed from net investment to withdrawal. In the case of foreign exchange can not be observed by the market timely and large net return can be seen continuously, it will be interpreted by the market as a tightening policy again. Although it is only for hedging foreign exchange and the overall market liquidity will be moderately relaxed, it will affect the implementation of the central "lower financing cost" policy intention.

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< p > Second, the pressure of RMB appreciation is coming again. International capital inflow means that the current trend of RMB depreciation will turn into a trend of appreciation again. If we do not restrain it, it will aggravate the already difficult foreign trade and domestic economy. The risk of deflation will further aggravate, which will conflict with the current "stable foreign trade", "steady growth" and "employment protection". If it is curbed, it will further constitute the truth of the US intervention in China's exchange rate.

The end result is that the central bank can not really withdraw from normalization intervention and delay the reform of exchange rate formation mechanism.

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