RMB Devaluation Pressure Or Early Release

In the short term, the possibility of a significant depreciation of the renminbi is minimal.

This is mainly due to the following reasons: first, under the pressure of high and new trade surpluses, the conditions for the depreciation of the RMB are not mature. At this point, depreciation will cause unnecessary trade friction. Meanwhile, the share of China made in the global market has reached a very high proportion, and it is unlikely to continue to increase its share by relying on devaluation.

Secondly, after November, the yuan began to depreciate slightly, but the middle price did not rise, especially the middle price of this week, which opened for three consecutive days. This is an important policy signal. It highlights that the central bank has no intention of promoting the depreciation of the RMB.

In addition, after the RMB exchange rate reached 6.20 against the US dollar, the stability of the central bank appeared, indicating that the recent downward trend has caused the central bank to intervene.

Although the central bank is gradually withdrawing from normalization intervention, the central bank can not take an onlooker attitude in the face of extreme market conditions.

So far,

The exchange rate policy is to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level and expand the two-way floating zone of exchange rate. Therefore, this sharp fall does not mean that the exchange rate policy will change significantly, but is consistent with the expansion of two-way floating zone. It should be regarded as a normal embodiment of official policy at the market level.

In the first quarter of this year, the RMB depreciated against the US dollar. During the same period, the central bank announced that it would relax the fluctuation range of RMB within days to 2% above the middle price, and the elasticity of RMB immediately increased significantly.

In the short term, we expect that the renminbi will remain volatile after the sharp drop, and it will fluctuate before the end of the year or in the 6.12-6.20 range. The mid range fluctuation will expand and the fluctuation range may extend to 6.05-6.26.

Another noteworthy phenomenon in the near future is that the 1 year US dollar forward rise has risen sharply from 1300 to 1650.

The main reason for this is that the interbank capital side is tight, leading to interest rates rising, and the stock market has surged to attract capital inflows, which has aggravated the tight financial position. If the central bank introduced liquidity measures such as drop in rates or a sharp adjustment in the stock market, it should trigger a return to the US dollar's rise.

In fact, as the downward pressure on the domestic economy increased, especially after a series of micro stimulus policies failed to see the obvious effect, the market's expectation of RMB depreciation began to rise. However, this expectation is not reflected in the long term US dollar premium (the US dollar premium is mainly caused by the widen interest rate between the RMB and the US dollar). It is mainly reflected in the decline in the volume of foreign exchange settlement and the rise in the volume of foreign exchange purchase.

At present, the exchange rate between banks has changed from surplus to deficit, while foreign exchange holdings have narrowed significantly.

In fact, the decline of the settlement rate is actually the weakening of the power of RMB appreciation and the rise of the depreciation pressure.

On the other hand, the move of the US dollar has also increased the pressure of RMB adjustment.

Due to the fact that the flexibility of the RMB against the US dollar is still insufficient, the US dollar actually leads to a substantial rise in the effective exchange rate of the RMB.

From historical data, the appreciation of the RMB real effective exchange rate has brought substantial pressure on China's exports. The impact of this appreciation on China's foreign trade has been reflected in the rapid cooling of foreign trade data in November.

In fact, the dollar bull market is progresses faster than we expected.

Since May this year, the US dollar index has appreciated by 11.6%. The rapid advance of this unilateral bull market may make us anticipate that the RMB will rise first and then depreciate next year, that is, the pressure of depreciation will be released ahead of schedule.

From the current point of view, maintaining the basic stability of the RMB effective exchange rate should be an important task.

This goal can better play the role of exchange rate in regulating the national economy, and enable foreign trade departments to adapt to the complex and changeable market of external demand.

But at the same time, it is bound to increase the two-way fluctuation of RMB.

In other words, we should hedge against the US dollar against the US dollar against the real effective exchange rate and the foreign trade department.