RMB Spot Exchange Rate Rose More Than 100 Points

European version QE launches multi national central bank [micro-blog] moves "self insurance"

The European Central Bank has announced that it will buy 60 billion euro bonds every month from March to September next year, with a total value of more than 1 trillion euros.

The intention is to raise the inflation rate in the euro area in order to revitalize the regional economy.

The so-called QE means that the central bank is implementing low interest rates.

After the policy, through the purchase of treasury bonds and other medium and long term bonds, increasing the supply of basic money is also simplified as indirect printing.

The European central bank such huge quantitative easing policy, causes the euro to exchange the dollar exchange rate to fall sharply, and has the investment bank to predict, the euro and the US dollar will possibly fall to the parity level in the future.

Around the world

In the recession, the ECB is likely to set off a "depreciation of exchange rate".

In fact, a week before the European Central Bank announced quantitative easing, central banks such as Switzerland, Denmark, Turkey, India, Canada and Peru have all sought to protect themselves and compete for expansionary monetary policy.

Switzerland decided to decouple from the euro. Denmark, whose currency was linked to the euro, was forced to cut interest rates. The Central Bank of Canada also announced an unexpected cut in interest rates.

Market acceptance of depreciation

The European version of QE superimposed the Fed's rate hike expectations, pushing the US dollar stronger, and setting downward pressure on the RMB exchange rate.

Last week, the yuan depreciated by 154 basis points against the US dollar, and the spot exchange rate depreciated by 222 basis points.

On the 26 day, the central parity of RMB against the US dollar was 6.1384, the lowest since 2015.

In the offshore market, the renminbi showed signs of accelerated depreciation and fell to 6.2580 against the US dollar.

But compared with the past, the market's acceptance of RMB devaluation has been significantly improved.

In fact, since 2014, the two-way fluctuation of RMB exchange rate has become more and more significant.

The industry generally believes that short-term appreciation and depreciation are normal fluctuations, which are not only affected by the fundamentals of the economy or market, but also the inevitable result of the marketization of the RMB exchange rate formation mechanism.

In the long run, there is no basis for a significant depreciation of the renminbi.

Fu Bingtao, head of the strategic planning department of the head office of the Agricultural Bank of China, pointed out that considering the strong ability of the Central Bank of China to control exchange rate, the depreciation of the RMB against the US dollar is limited.

Liu Dongliang, a senior analyst at China Merchants Bank's financial market department [micro-blog], has also expressed his view that under the background of China US monetary policy differentiation, there is indeed devaluation pressure, but it is more likely to enter two-way fluctuations rather than obvious depreciation.

He also pointed out that the QE of the European Central Bank will increase global liquidity, and international arbitrage capital will be the second largest destination after the United States, with interest rates and economic growth relatively high.

This will relieve China's pressure on capital outflow due to the strong US dollar to a certain extent.