The Fluctuation Range Of Institutional Gambling On The "Continuous Decline" Of RMB Is Widened

Some investment institutions are deliberately creating a market atmosphere of continuous "limit down" of the RMB spot exchange rate through the exchange difference transaction, aiming to gamble that the central bank has increased the volatility of the RMB exchange rate, which may further broaden the fluctuation range of the RMB exchange rate in the second quarter. What's more, they are betting that the People's Bank of China has to abandon the RMB exchange rate formation mechanism and link it with the US dollar to increase the proportion of a basket of currencies such as the euro and the yen based on the needs of economic recovery and growth.

On February 27, the spot exchange rate of RMB against the US dollar fell to 6.2695 at the beginning of trading, 1.98% lower than the central parity rate of 6.1475 on the same day, again approaching the lower limit of 2% of the daily exchange rate fluctuation set by the Central Bank.

This is the third consecutive trading day after the Spring Festival when the spot exchange rate of the RMB was close to the limit.

"The new normal of RMB exchange rate fluctuation since February is that it hovers near the limit price almost every day." A foreign exchange trader from a local bank in Hong Kong joked. He roughly estimated that the cumulative number of days since February when the spot exchange rate of RMB was close to the limit had exceeded 10 days.

But he said frankly that after the Spring Festival, RMB exchange rate It seems unreasonable to approach the limit continuously, because the current economic data does not support the RMB spot exchange rate to fall so frequently. During the Spring Festival, the HSBC China manufacturing purchasing managers' index (PMI) released by HSBC showed that the initial PMI data in February rose to a high of 50.1 in the last four months, indicating that China's economy Is stabilizing and recovering; At the same time, the top officials of the Federal Reserve hinted that they might slow down the pace of interest rate hikes.

The reporter learned from several traders that after the Spring Festival, RMB Spot exchange rate One of the driving forces behind the continuous approach to the limit is the surge of carry trades.

The so-called foreign exchange difference transaction is actually that many enterprises and investment institutions find that the RMB exchange rate quoted in the overseas offshore market is significantly lower than that quoted in the domestic onshore market. They first purchase foreign exchange in China (buy US dollars to sell RMB), and then through overseas sales of foreign exchange (buy RMB to sell US dollars), arbitrage the price difference between the domestic and overseas RMB exchange rates.

A foreign exchange broker said frankly that with the expected further increase of RMB devaluation during the Spring Festival, this kind of foreign exchange spread transaction has a growing trend.

He found that some investment institutions are deliberately creating a market atmosphere of continuous "limit down" of the RMB spot exchange rate through the exchange rate carry trade, aiming to gamble that the central bank has increased the volatility of the RMB exchange rate, which may further broaden the range of RMB exchange rate fluctuations in the second quarter. What's more, they are betting that the People's Bank of China has to abandon the RMB exchange rate formation mechanism and link it with the US dollar to increase the proportion of a basket of currencies such as the euro and the yen based on the needs of economic recovery and growth.

"Their calculation is that these exchange rate reform policies will lead to greater decline and fluctuation of the RMB exchange rate, so as to obtain more significant exchange spread income," said the foreign exchange broker.