Short Term Pressure On RMB Exchange Rate Does Not Hinder The Strong Pattern

On the 17 day, the spot exchange rate of RMB against the US dollar continued to be weak in 6.19 front-line shocks. Market participants believe that the recent weakening of the RMB exchange rate is not only affected by domestic interest rate policy adjustment and seasonal demand for foreign exchange, but also related to the overall performance of emerging market currencies. In view of the internal and external economic and financial situation, the RMB is still facing some pressure of depreciation in the short term. However, abundant foreign exchange reserves and stable middle price policy can effectively control the expectation of RMB devaluation, plus RMB internationalization and other factors.

　　 Spot price Hard to overcome

On the 17 day, the RMB exchange rate between the RMB and the US dollar rose again in the domestic inter-bank foreign exchange market. According to the latest data from China foreign exchange trading center, the central parity of RMB against the US dollar was 6.1137 on that day, up 45 basis points from the previous trading day, a record high since February 20th. The central parity of RMB against the US dollar is another step closer to 6.0969 at the end of last year. If we can recover less than two hundred base points in the next two weeks, the middle price of the RMB against the US dollar will not only recover the first half decline but also avoid the first annual depreciation of history.

On the 17 day, in the spot trading of RMB against the US dollar, the renminbi showed a weak trend throughout the day. The intraday market closed to the 6.20 pass again, closing at 6.1975, which was 72 basis points lower than the closing price of the previous day. At present, the spot exchange rate of RMB against the US dollar has a gap of more than 1400 basis points from the high point of last year and the closing price at the end of last year. It is almost impossible to recover the decline in the first half of the year.

This year, the spot exchange rate of RMB against the US dollar has weakened considerably in the first two months since November and two rounds since then. Some foreign exchange traders said that the most recent month's derogatory effect was mainly that the market factors were playing a role: first, the seasonal factors of buying foreign exchange at the end of the year and the continued weakness of international oil prices in recent years, and jointly promoted the purchase of foreign exchange through passenger exchanges. Two, the domestic interest rate policy loosened in November, and the change of interest rate between China and the US was unfavorable to the trend of RMB exchange rate. From the trend, after the central bank cut interest rates, the spot exchange rate of RMB against the US dollar has accelerated. Three, the willingness to hold foreign exchange will rise and the foreign trade surplus will weaken the RMB exchange rate. Since August, there has been a deficit in the three consecutive months of domestic banks' sale and sale of foreign exchange.

The balance of foreign exchange settlement means that the higher trade surplus has not been spanlated into higher demand for settlement, and the external trade surplus has greatly reduced the actual support for the RMB exchange rate. Four, since November, the US dollar has been strong, the US dollar has appreciated in other major currencies, and the US dollar index has risen from 86 to 88. Recently, some emerging market currencies have seen a significant depreciation of the US dollar, which is also one of the factors affecting the depreciation of the renminbi.

　　 emerging market Currency weakness

In recent years, although the foreign currency falls, the dollar single strong pattern is distinct, but compared with the performance of other major currencies, many emerging market currencies are still "extraordinarily prominent". The most typical one is rouble.

Recently, the collapse of the ruble has been hard to stop because of falling international crude oil prices. Malaysia's currency, the largest oil and gas exporter in Asia, was also "hurt" because of the sharp drop in oil prices. Malaysia's ringgit fell earlier this month since the Asian financial crisis. The Indonesian rupiah also hit a sixteen year low against the dollar earlier this week.

Analysts believe that the recent depreciation of many emerging market currencies, to a large extent, is affected by the economic situation of some countries and some specific factors, such as the sharp drop in oil prices, and the impact on Russia and Malaysia, which is relatively dependent on oil and gas exports. First, since the second half of this year, some emerging market countries, including China, have slowed down to varying degrees, and the economy has basically weakened their exchange rate support. Two, under the background of global economic turbulence, the United States is thriving. The Federal Reserve tightens monetary policy and expects to continue to ferment, attracting international capital back to the United States. In fact, there are signs of capital outflow in many emerging market countries in recent years.

This person believes that the US economic recovery and the return of the Fed's policy to normalcy will still be the main logic that will affect the foreign exchange market in the future.

　　 and depreciation The total difference is one step away.

Market participants believe that the overall domestic and external economic and financial situation, the renminbi is still facing a short-term depreciation pressure. From the latest data, domestic economic growth slows down, growth momentum is insufficient, price deflation risks rise, monetary policy is still relaxed. On the contrary, US economic growth is relatively steady, and the market has strong expectations for the fed to raise interest rates. Therefore, Sino US economic and Sino US interest rates may be further changed accordingly, so that the demand for revaluation of the RMB against the US dollar will be revalued. In recent years, the expectation of RMB exchange rate has been divided by enterprises and other sectors. The property of RMB assets has been strengthened, and the influence of market trading behavior and market sentiment on exchange rate fluctuation has increased. In addition, the central bank gradually withdraws from normal foreign exchange intervention, and the fluctuation of RMB exchange rate may be amplified, and the RMB exchange rate may continue to be weak in the short term.

Market participants believe that it is impossible to allow moderate depreciation of the renminbi. After all, the domestic and international economic situation has made the RMB no appreciable revaluation. Because of the strong US dollar, the rising interest rate in the US dollar and the devaluation of currencies such as Europe and Japan, it is a big probability event. If we maintain a strong RMB, it will be costly. The stronger renminbi will continue to push up the already high RMB real exchange rate, which will further reduce the competitiveness of the export sector, which is not conducive to the improvement of foreign trade. If the yuan keeps strong against the US dollar, the higher interest rate of the US dollar will also have an impact on the autonomy of the domestic interest rate policy.

Market participants believe that there is no risk of significant devaluation of the renminbi. First of all, the authorities concerned have the ability to resolutely prevent the continued devaluation of the renminbi from becoming a reality. Our country has huge foreign exchange reserves, and it is possible for the relevant departments to maintain a strong exchange rate. In recent years, the central parity of the RMB against the US dollar is very strong, which conveys a clear signal for stabilizing the price of the RMB market. Second, the internationalization of the renminbi and the RMB becoming an important reserve currency need a relatively strong exchange rate as a support. From overseas experience, we attach great importance to the strong exchange rate in the process of internationalization of major currencies. In addition, because capital is profit driven, a strong Renminbi helps attract capital inflows and reduce capital outflow risk. Finally, the capital export plan such as "one belt and one road" needs a relatively strong RMB exchange rate as a support.

It can be said that the relevant departments will not tolerate the weakening of the RMB exchange rate and the ability to prevent a significant devaluation of the renminbi. Some traders said that 6.20 of the market was regarded as the watershed of the short-term RMB trend, but the spot exchange rate of RMB has touched 6.1999 for 10 times since the end of the 10 day.

Market participants said that technically, there is strong support for the 6.20 front-line. It is expected that in the short term, the spot exchange rate of RMB against the US dollar will probably start weak shocks near this point. From a longer period of view, although the unilateral appreciation pattern has been broken, China's economic growth potential is very large, and its growth rate is gradually bottoming out. It is also expected that the RMB will continue to maintain a relatively strong trend and the phased two-way fluctuation may also be strengthened.