The Easing Cycle Gradually Opens Up The Weakening Of The RMB Exchange Rate.

Since November, especially since the central bank lowered interest rates in late November, the spot exchange rate of RMB has continued to decline.

The US dollar continues to flaunt its strength, the market expects the RMB to start the cycle of interest rate cuts and the relative weakness of China's economic fundamentals, thus promoting the weakening of the RMB's phase.

Analysts say that the soft trend of the RMB exchange rate is expected to continue for some time in the context of a new round of monetary policy that is expected to enter a new round of loose cycle, but on the other hand, it is expected that the phased weakening of the RMB is still difficult to evolve into a long-term trend in combination with the strengthening of China's economic stability expectations, the steady advancement of the RMB internationalization and the comprehensive policy orientation of the currency policy.

Since the central bank announced the massive easing of the asymmetric interest rate cuts in November 21st, the renminbi's spot exchange rate against the US dollar has been running smoothly.

Data show that in December 2nd, the central parity of RMB against the US dollar was 6.1325, up 44 basis points from the previous trading day.

Spot exchange rate, though rising with the middle price, rose by only 17 basis points or 0.03%. The closing price of 6.1503 is also the fifth consecutive trading day under the middle price.

Since November 21st, the spot exchange rate of RMB has dropped by 254 basis points or 0.41% from 6.1249.

In fact, since the beginning of November, the spot exchange rate of RMB has gradually weakened in the context of the market's relaxation of the central bank's monetary expectations.

Data show that the spot exchange rate of RMB against the US dollar began to decline after the seven month high of 6.1078 in October 31st, and the closing price in December 2nd dropped 368 basis points or 0.60% compared with the closing price in October 31st.

From the monthly performance, the RMB spot exchange rate rose 6 months from May to October this year, and finally depreciated at the beginning of November. The depreciation rate was 0.51% in that month.

It is worth noting that in November, with the weakening of the RMB spot exchange rate, the central bank authorized the China foreign exchange trading center to announce the central parity of the RMB against the US dollar.

As of December 2nd, the median price was 136 basis points or 0.22% higher than 6.1461 in October 31st.

Meanwhile, in November, the US dollar index rose 1.52% to 88.24 points, though not as good as 7 months, 8 months and 9 months of three months this year, but still higher than the 1.18% monthly increase in October.

It is not difficult to find that the middle price of the RMB exchange rate against the US dollar is still showing a strong stability.

For the weaker performance of the RMB spot exchange rate since November, the market participants generally believe that the relative weakness of China's economic fundamentals at this stage and the opening of the RMB interest rate cycle are the main reasons leading to the continued downward trend of the RMB exchange rate.

But on the other hand, in the light of factors such as China's economic stabilization and recovery, RMB internationalization and capital export, although the RMB exchange rate is expected to remain weak for some time in the short run, in the long run, it is still too early to say that the renminbi will turn into a trend of depreciation.

China Merchants Bank believes that for the renminbi, there is a strong pressure of devaluation after the theoretical reduction of interest rates. However, under the current "managed floating exchange rate system" in China, the situation of interest rate and exchange rate will not appear in the next period of time. It is expected that the RMB exchange rate will only appear warm and callback, and will remain strong in general, or even exclude the possibility of further appreciation.

The view from Huachang Securities pointed out that at this stage, China is learning from Japan's "strong yen" mode to export capital to emerging markets. The basic requirement of this capital export mode is the confidence of the market in the RMB exchange rate and confidence in the RMB as the currency of the regional settlement. Therefore, in the medium term, the RMB exchange rate needs to remain relatively strong.

In addition, there are foreign exchange traders said that the new round of monetary easing opened by the central bank is still in the context of normal growth and low growth of foreign exchange. In terms of money supply, the price and quantity will be "double loose". Once the trend devaluation of the RMB, the effect of monetary easing of the central bank will be greatly offset. In view of this, the RMB will not be derogated for a long time.