The US Dollar Index Is Stronger Than The Nine Year High RMB Exchange Rate Or More Difficult.

What concerns the market is that the RMB exchange rate first depreciated in 2014.

Statistics show that as of the last trading day in 2014, the central parity of RMB in 2014 dropped by 0.36%, and the spot exchange rate of RMB dropped by 2.42%.

At the same time, this is the first annual depreciation of the central parity and spot exchange rate since the reform of RMB exchange rate in 2005.

Therefore, the short-term market bearish sentiment is strong, but most industry experts interviewed said that the appreciation and devaluation pressure coexisted in the RMB exchange rate in 2015, but the pressure of devaluation is greater due to the stronger US dollar and loose monetary policy, especially in the short term.

However, in 2015, the extent of RMB devaluation may be limited, and two-way volatility is more obvious.

For the first devaluation in 2014, the respondents said that the recovery of the US economy and the strengthening of the US dollar were the important reasons for the depreciation of the RMB exchange rate.

At the beginning of the new year, the dollar continued its previous rally.

Data show that in January 6th, the index closed at 91.61 points, a nine year high.

And the renminbi

The Bureau looked weak.

January 5th, US dollar / RMB

At 6.1248, it was 58 basis points lower than 6.1190 at the end of 2014.

Under the influence of the reduction of the intermediate price, the spot exchange rate of the RMB against the US dollar was sharply lower at 110 basis points in the morning market, and it was 6.2150, the lowest intraday rate to 6.2244, closing at 6.2200, down 160 basis points or 0.26% compared with the previous trading day, setting the biggest one-day drop in the last half month.

In January 6th, the RMB exchange rate against the US dollar opened at 6.2215, devalued 15 basis points, but rose more than 100 points in the intraday concussion and returned to the 6.20 level.

In the past 2014, the trend of the RMB exchange rate against the US dollar can be described as twists and turns: the exchange rate of the renminbi against the US dollar has experienced a "roller coaster market" which first depreciated, then appreciated and depreciated again, and also broke the market's expectation of unilateral appreciation of the US dollar.

Since mid February 2014, the spot exchange rate has gone down to above 6.25.

But in June, the depreciation trend changed and the appreciation market appeared.

According to the latest data from China foreign exchange trading center, the central parity of RMB against the US dollar in June 9th was 6.1485, a record high since March 27th.

The median price of 10 days increased by 138 basis points compared with the previous trading day, with a single day gain of 0.22%, the largest in 20 months.

In the last December, the appreciation was interrupted again.

Statistics show that in December, the depreciation rate of RMB against the US dollar exceeded 1% in a single month.

In other words, the spot exchange rate of the renminbi appeared at the beginning of 2014 and the end of the year two distinct devaluation quotations.

Although the RMB exchange rate trend is very volatile in 2014, Wen Bin, chief researcher of Minsheng Bank (600016, stock bar), told the China business newspaper (blogger, micro-blog) that the exchange rate elasticity of RMB will continue to increase in 2015, showing a two-way fluctuation.

In March 15, 2014, the central bank announced that the floating exchange rate of RMB against the US dollar would be expanded from 1% to 2%.

"The central bank quit normal intervention, and the annual exchange rate trend basically reflects the changes in the Federal Reserve's monetary policy and the macroeconomic situation in China, and the market forces are strengthened."

Wen Bin said.

It is worth noting that although the RMB has depreciated, the effective exchange rate of RMB has appreciated.

According to the latest data released by the Bank of International Settlements (BIS) in recent months, as of November 2014, the effective exchange rate index of the RMB was 124.43, and the total appreciation in the first 11 months was 4.8%.

The nominal effective exchange rate index of RMB was 120.62, and the total appreciation in the first 11 months was 5.6%.

In 2013, the real effective exchange rate and nominal effective exchange rate of RMB increased by 7.9% and 7.2% respectively, and the increase was significantly higher than that of 2.2% and 1.7% in 2012.

In November 2014 alone, the nominal effective exchange rate index increased by 2.5% to 120.62, rising for sixth consecutive months and refreshing again. The real effective exchange rate index of the renminbi rose 2.3% to 124.43 in November, rising for sixth consecutive months and a record high.

Wen Bin believes that this reflects the RMB exchange rate formation mechanism needs to be improved.

In spite of the depreciation of the RMB against the US dollar, because the renminbi is mainly pegged to the US dollar, under the background of a sharp rise in the US dollar exchange rate index, the renminbi has a passive appreciation.

Non US dollar currency pressure

Respondents said there was still devaluation pressure on the renminbi in 2015.

In 2015, the strength of the US dollar and the downward pressure on the domestic economy caused loose expectations of the currency and other factors to depress the RMB.

However, there is no need to worry about a significant devaluation or a limited or limited depreciation.

Wen Bin said that in 2015, the market may change the expectation of the renminbi, and then there are two situations: first, the signs of outflow of funds, which impact on domestic finance and assets; secondly, with the increase of US dollar allocation, the pressure of RMB depreciation will be formed.

In the view of Wen bin, the Fed's interest rate is expected to rise. The US dollar index is expected to continue to rise. International capital flows back to the US and US dollar demand for asset allocation will increase, leading to continued pressure on non US dollar currencies, including the renminbi.

The sustained economic recovery in the us directly affects the Fed's rate hike.

The data released in December 23, 2014 showed that the actual value of GDP in the US in the three quarter was significantly revised to 5%, which exceeded the market expectations of 4.3, the highest since the three quarter of 2003.

The data show that the US has strong economic growth momentum.

Meanwhile, the US dollar index recorded 90.08 in December 23rd, a record high since April 2006.

The US dollar index hit a new high, reflecting to some extent the anticipation of the Fed's interest rate hike.

Foreign investment banks have recently predicted that the Fed will raise interest rates in the first quarter of 2016 instead of the generally expected middle of 2015.

However, the reporter noted that the minutes of the December 2014 policy meeting released by the Federal Reserve in January 7th showed that it was unlikely that interest rates would rise before April.

In the industry's view, as the US QE withdraws and interest rates are expected to rise, the appreciation of the US dollar will affect other countries outside the United States to varying degrees.

Emerging markets, in particular, face not only the depreciation of their currencies, but also the risks of capital flight and other risks.

At the same time, the possibility of capital outflow contained in the innovation index of the US dollar has increased the devaluation pressure of the RMB, thus restricting the further easing of the domestic monetary policy.

At the same time, the latest macroeconomic data also show that the domestic economy is still facing downward pressure, and monetary policy can be further relaxed.

According to the data released by the National Bureau of statistics in January 1, 2015, the decline in production and new orders index dragged down. In December 2014, the official manufacturing PMI index was 50.1, hitting a low of 18 months.

This reflects that China's manufacturing activity is still insufficient and the economy still has downward pressure.

Market expectations for further economic stimulus measures are also heating up.

Qu Hongbin, chief economist of HSBC Greater China, believes that data in December 2014 showed that the manufacturing industry slowed further at the end of the year, mainly due to the weakening of domestic demand.

He also said that the momentum of economic growth weakened, inflation pressure dropped, monetary policy is necessary to continue easing in the next few months.

Thirdly, Wen Bin pointed out that the overall stability of China's macro-economy and the balance of international payments have decided that the exchange rate of RMB against the US dollar will basically reach an equilibrium level.

The relative weakness of imports in 2014 led to a 30% increase in China's current account surplus over the previous year. It is estimated that the current account surplus will be negative in 2015. At the same time, China is expected to become a net exporter of foreign investment. The balance of international payments will reduce the pressure of RMB appreciation.