The Way Of Currency Dominance In Foreign Exchange Market

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In May, the central bank increased its foreign exchange quota by only 361 million yuan, or nearly zero growth. This means that the central bank is intervening in the normal intervention of the foreign exchange market and holds the initiative in monetary policy in its own hands. P

The central bank is committed to making monetary policy proactive, making use of directional easing monetary policy to stabilize growth and adjust its structure to the end.

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< p > the latest balance sheet released by the central bank on the 7 day shows that in May, the central bank's foreign exchange balance was 27 trillion and 300 billion yuan, which only increased by 361 million yuan compared with the end of 4, and the new size of the central bank dropped by 99.57% compared with April.

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< p > April, the figure is 84 billion 589 million yuan.

Since last August, the growth rate of the central bank's foreign exchange holdings has begun to increase, and it has dropped to a record high in January this year, setting a 11 month low in May.

The central bank announced in May that all foreign financial institutions accounted for 38 billion 600 million yuan of new foreign exchange, which is also far lower than last month's 116 billion 900 million yuan and set the lowest level since last August.

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< p > overall, the increment of foreign exchange held by the central bank has also experienced a sudden sharp decrease or even negative growth.

In June 2013, foreign exchange accounted for 41 billion 205 million yuan in all financial institutions, while the central bank's foreign exchange holdings also showed a negative growth of 9 billion 87 million yuan.

However, since August, as the central bank has increased its foreign exchange reserves, all foreign financial institutions have increased their foreign exchange holdings since September of that year, returning to 100 billion yuan.

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< p > market participants believe that the increase in foreign exchange financing of financial institutions has shrunk, reflecting the balance of demand and supply in the foreign exchange market. The central bank is implementing the promise to withdraw from direct intervention at the beginning of the year.

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Zhou Xiaochuan, President of the Central Bank of Boao, said at the April Boao forum that we should improve the RMB exchange rate formation mechanism.

We should increase the strength of the market to decide the exchange rate and gradually withdraw from the normal foreign exchange intervention.

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Under the current foreign exchange management system in China, the central bank plays the most important counterparty role in the foreign exchange market, so it is possible to observe whether it intervenes in the foreign exchange market through changes in the foreign exchange assets held by the central bank. P

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P, vice president of Minsheng Securities Research Institute, believes that foreign exchange has increased the central bank's monetary policy initiative.

Exchange rate fluctuations have absorbed foreign exchange reserves, so that the central bank does not need to maintain exchange rate stability and passively put in the basic currency, and foreign exchange has withdrawn from the main channel of the basic currency.

From the balance sheet of the monetary authority, the basic money supply channel has changed from the change of foreign exchange assets to the change of the central bank's claims to the government and other depository companies.

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"P > < a href= > http://www.91se91.com/news/index_q.asp > > monetary policy < /a > initiative Quan Zengqiang creates space for economic structure adjustment.

The central bank's changes in claims to the government and other depository companies are reflected in refinancing, PSL and targeted reduction.

Refinancing will enable the currency to exercise its fiscal functions, such as the central bank's support for shanty towns through refinancing, which can play a role of underpinning in the economic downturn.

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< p > Guan Qing you also pointed out that, combined with the central bank's two quarter convention announcement and the background of foreign exchange contraction, the central bank will increase the intensity of directional easing, and the possibility of overall easing is unlikely.

The central bank's two quarter meeting announcement increased the "flexible use of a variety of monetary policy tools" compared with the first quarter.

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< p > Wen Bin, senior expert of the Ministry of development and planning of Minsheng Bank (600016, stock bar), said that the change of foreign exchange occupying data is related to hot money. After hot money is inflow, it can only be forced to hedge, and monetary policy is relatively passive.

If the impact of hot money is small, monetary policy can adopt more flexible policies based on China's macroeconomic situation in the case of relatively balanced exchange rates.

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< p > "we believe that in the context of shrinking foreign exchange, monetary policy will continue to use directional policy tools to increase directional easing.

Following the refinancing and directional reduction, the possibility of directional differential interest rate reduction is further enhanced by the further introduction of PSL.

The possibility that many institutions will reduce foreign exchange holdings to a full scale reduction is actually improving.

Guan Qingyou said.

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< p > Guo Tianyong, director of the research center of Bank of China (601988, Guba), Central University of Finance and Economics, also believes that the scope of the future policy of < a href= "http://www.91se91.com/news/index_cj.asp" will be further increased, and the policy of rediscount or reloan will also continue to be implemented.

"From the current economic situation, the benchmark interest rate should be adjusted downward."

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