RMB Is Facing Downside Risks This Week.

China's stock market slumped 5% on Monday (January 19th) opening after the three major brokerages took the administrative supervision measures to suspend the new credit account of the newly opened securities lending and margin trading clients, and the renminbi expanded further to 7.5% in the afternoon, and the RMB against the US dollar also fell to the weakest level in 2015.

Analysts pointed out that this week China's economic data are hard to say optimistic, and the RMB will face downward pressure.

China's regulators strengthened the regulation of margin trading after rising 63% in six months.

The Central Bank of China (PBOC) lowered the central parity of the RMB against the US dollar to 0.07% to 6.1230, the biggest reduction in two weeks.

The China Securities Regulatory Commission announced on Friday that a number of brokerages were fined for violation of the margin trading business, which undoubtedly poured cold water on the current "leveraged bull market".

On Monday, A shares plunged 7% in the afternoon, and the early leading sector such as brokerage and insurance fell sharply.

One of the cornerstones of the current A share bull market is the incremental capital brought about by the continuous expansion of margin trading, and of course, its potential risks are also improving.

The reorganization of the two financial businesses will squeeze out some excessive financing and short term hot money in the short term, and the market will soon be adjusted.

Late last Friday, the securities and Futures Commission punished two irregularities brokers for news. Overseas A share index futures plunged 5%.

At the opening of Monday, the Shanghai Composite Index fell 5.53% to 3189.73 points. When the morning market closed, the Shanghai Composite Index Expanded to 6.3%, at 3163.72 points.

On Friday, China Securities Regulatory Commission spokesman Deng GE announced that some securities companies that had problems in margin trading were punished, and nine brokerages took the regulatory measures to order corrections within a specified time, to increase the number of internal compliance checks and warning.

Brilliant & Bright Investment Consultancy Ltd. analyst at Hongkong Daniel Chan said: "policymakers believe that China's stock market is rising too fast, so cooling measures are being taken, coupled with uncertainty in Europe, and demand for the US dollar will be quite strong.

All these factors are pressure on the short-term prospects of the renminbi. "

The yuan fell to 6.2249 against the US dollar in intraday trading on Monday, the weakest level since December 30th.

The spot rate in the domestic market is 1.5% lower than the middle price.

In an interview with Andy Ji, a foreign exchange strategist at CBA in Singapore, Commonwealth of Australia said that as the gross domestic product (GDP) data and liquidity increased, the renminbi faced downward pressure this week.

Ji said that the real effective exchange rate of RMB is at a historical high level, which is not conducive to local exporters, which also increases the depreciation pressure of the RMB against the US dollar.

CBA estimates that China's fourth quarter GDP growth rate, which is due to be released on Tuesday, may fall to 7.2%, pushing the yuan down. If the bank's forecast is correct, China's GDP growth in the fourth quarter will be the lowest since March 2009.

Ji said that the Central Bank of China may also lower the RMB exchange rate this week.

Repeat the practice of lowering the middle price in the second half of the month in the past six months.

He also said that in view of the December Society

The biggest increase since June, the increase in liquidity may also have a downward pressure on the renminbi.

Data released by the BIS at the weekend showed that the real effective exchange rate index was 126.16, the nominal effective exchange rate index was 121.53 at the end of 2014, and the annual increase was 6.24% and 6.41%, respectively, which was slower than that in 2013.

The data also show that the RMB is actually effective in December.

The index rose 1.23%, and the nominal effective exchange rate index continued to rise by 0.75%, all of which rose for a seventh consecutive month and set a new record.

In that month, the spot exchange rate of RMB against the US dollar fell by 0.95%, setting the largest monthly decline in nine months, and 2.42% with a year-round depreciation of 2.42%, and a four year appreciation.

In addition, the yuan rose 1.29% against the euro this month, but it narrowed to 0.17% against the yen.

The US dollar index rose to a nearly nine year high in late 12 and recorded an annual increase of about 13%, the strongest in 1997.

The effective exchange rate index of BIS is based on the weight of the 2008-2010 year trade data and is based on 2010.

In the weight of the RMB index, the euro, the US dollar and the yen rank the top three.