Unstable Economic Support, RMB Exchange Rate Or Strong Shocks

RMB will be traded against the US dollar in 6.15 days after the first round.

Finally, this important short-term resistance position was conquered on August 15th (last Friday).

On the 18 day, the spot exchange rate of RMB continued to rise, the intraday market once again refreshed nearly five months high, but the paction was slightly cautious.

On the 18 day, the central parity of the RMB against the US dollar went up by 10 basis points, and was 6.1528.

Affected by this, the RMB exchange rate against the US dollar on the same day opened up 10 basis points at 6.1460, the spot price in early trading rose slightly, most of the time showed a trend of sideways shocks, and the exchange rate rose in the afternoon, reaching the highest level to 6.1426 in the afternoon. It also hit a high level since March 17th this year, closing at 6.1437, a 33 basis point higher than the closing price of the previous day.

A foreign exchange trader in the bank reflects that although the bank accounts for most of the foreign exchange settlement, there are large banks buying dollars at low positions, making the market cautious and wait-and-see sentiment rising and trading generally light.

In fact, this is also a typical feature of the RMB spot market since mid August.

This wave started in the early June. At first, it acted on the ladder type. The short-term appreciation often followed a continuous concussion to digest the divergence of market expectations, and benefited from the strong economic data in June. The appreciation of the renminbi accelerated significantly in late July and lasted until mid August.

The rate of appreciation of the renminbi has slowed down since last week.

Market participants pointed out that, on the one hand, the appreciation of RMB was faster and the spot rate of exchange was approaching 6.15. In the short term, the rise of short-term uncertainty led to a profit taking tendency in the US dollar. On the other hand, the phenomenon of large foreign exchange purchases in the recent market also affected market sentiment.

Foreign exchange analysts pointed out that due to the lack of strong driving factors, the two sides of the 6.15 sides of the renminbi may compete against the US dollar.

The appreciation space is relatively limited.

Since June 6th, the spot exchange rate of RMB has risen 1.8% in recent two months. The depreciation rate of spot exchange rate has narrowed from 3.4% at the highest point to 1.5% at present.

In this process, the market is expected to further enhance the appreciation of the renminbi in the future.

Bank of China and other institutions believe that the RMB exchange rate has appreciated significantly in recent years, mainly due to the improvement of the foreign trade situation, the expected strengthening of the domestic economic recovery and the improvement of capital market to attract capital inflow.

On the one hand, from the perspective of foreign trade, China's foreign trade surplus has been maintained at a relatively high level since the recovery of external demand and the relative weakness of domestic demand in May. In July, China's foreign trade surplus hit a record high of US $47 billion 300 million.

Given that the US economy continues to show a sustained recovery trend and that the market's external demand improvement is relatively clear, the foreign trade surplus is expected to support the RMB appreciation.

On the other hand, due to the expected strengthening of the domestic economy and the gradual appreciation of the renminbi, capital inflows have also recovered. This is partly confirmed by the positive growth of foreign exchange reserves in financial institutions in July. The acceleration of capital inflow in Hongkong also indicates that the attraction of RMB assets to cross-border capital is rising again.

Although domestic financial and economic data in July were weaker than expected, adding to the market's concerns about the sustainability of the economic rebound, one month's data could not falsify the previous market's judgement of the bottom of the economy.

Overall, with the support of foreign trade improvement and capital reflow, the agency believes that the renminbi will be appreciated in the future and the depreciation space is hard to see.

However, these institutions also point out that the space for appreciation of the renminbi will still be limited.

BOC International report said that the downward trend of domestic real estate still exists, and debt risk has not been effectively resolved, so the economy is hard to enter a new round of sustainable rising cycle, and the appreciation of RMB is relatively limited.

Nanhua futures believes that if the RMB reopens the track of unilateral appreciation, the central bank will intervene. Otherwise, efforts to increase volatility in the first half of the year will be in vain. Moreover, some capital outflows that may result from the gradual opening of capital account and the anticipation of the dollar's ambiguous interest rate increase will limit the appreciation trend of the renminbi.

China Merchants Bank analysts said there should be room for improvement in foreign trade in the second half of the year, but it is hard to see a strong rebound. There is little room for appreciating the RMB exchange rate and appreciating a moderate appreciation.

In addition, some people in the foreign exchange market pointed out that the volatility of the RMB exchange rate may increase again in the future.

First, the July data show at least that the economic recovery trend is not stable, and the fundamentals should be repeated to exacerbate the divergence of the foreign exchange market and trigger exchange rate fluctuations. The two is that the Fed's interest rate increase is expected to strengthen, and the Fed's policy adjustment and the US dollar exchange rate trend may disturb the RMB.