The RMB Exchange Rate Against The US Dollar Rose Three Times.

On Wednesday (April 1st), the spot exchange rate of the renminbi rose against the US dollar for the third consecutive trading day, which deviated from the continued downward adjustment of the central parity price.

Market participants pointed out that the official PMI data disclosed on March were better than expected, coupled with the loosening of the real estate policy and the improvement of economic growth expectations, which made the sentiment of more RMB in the market rise. However, the current situation of the comprehensive economic growth and the prospect of the US dollar trend show that the approximate rate of the future exchange rate of the people's currency will show a trend of concussion in March.

Echoing the trend of a mild rise in overnight dollar index, in April 1st, the central parity of RMB against the US dollar edged down by 12 basis points to 6.1434, which was the lowest in fourth consecutive trading days in the near future.

Nevertheless, on the day of the inter-bank foreign exchange market, the RMB exchange rate against the US dollar continued to expand at 26 basis points at 6.1970, continuing the relatively strong characteristics in the near future.

From the disk, Wednesday's RMB exchange rate against the US dollar opened to a narrow swing, and the intra day volatility did not exceed 60 basis points. At the end of the day, it closed at 6.1980, up 16 basis points from the previous day's closing price.

This is the spot exchange rate rising for the third consecutive trading day, and is obviously deviated from the trend of the middle price.

The foreign exchange market pointed out that in the background of the sustained mild rebound in the US dollar index recently, the RMB

The appreciation is mainly attributable to the market's improvement in China's economic growth expectations.

One of the main reasons for the current economic adjustment is the decline of real estate. The relaxation of the real estate policy will help improve the market.

Expectations.

In early March, the PMI data of China's manufacturing industry in March was 50.1, better than 49.8 expected by the market.

The improvement of economic expectation prompted the market to revise the view of overlooking the RMB in the early stage.

Sustained release has provided an upward momentum for the RMB exchange rate in the near future.

However, the market participants also pointed out that there is uncertainty in whether the economic stabilization and recovery can be brought into reality.

First, the weak economic data in the first quarter became almost a consensus. The continued appreciation of the RMB exchange rate still lacks strong support for fundamentals.

Two, the pattern of US dollar strength is not fundamentally reversed.

Therefore, the RMB exchange rate is likely to maintain a volatile pattern in the future.

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In recent days of uncertainty, if people share a common view of a certain market, the dollar will continue to rise - the dollar has risen 23% since last June, though there are some fluctuations in the middle.

It is also believed that the rising dollar will certainly make the emerging markets more disadvantaged.

Ren Yongli Stephen Jen of London SLJ Macro points out: "emerging markets may experience a partial currency crisis in 2015."

It is also a little worrying that economists at JPMorgan recently pointed out: "many emerging markets are beset by the combined effects of weak corporate profitability, over leveraging private sector, tighter financial conditions and poor governance", according to Morgan.

In addition, they are concerned about capital outflow.

There are many examples in history that support the pessimists' views.

A few years ago, many emerging market companies ignored the lessons of history and borrowed large amounts of cheap dollars, even though they lacked the dollar income.

They believe that the dollar is unlikely to rise because of the intention of the US quantitative easing to lower the US dollar exchange rate.

But now the US seems to be moving towards increasing interest rates (no matter how reluctant), while the BOJ and ECB continue to stride forward on the path of quantitative easing. The euro and yen have fallen against the US dollar, and almost all emerging market currencies are also.

Of course, the renminbi is a notable exception.

Today, many market participants believe that the US dollar will go up further, the euro and yen will continue to fall, and the Chinese will inevitably devalue their currencies.

But both the US dollar and the renminbi may not meet those general expectations.

Some people, such as David Bloom, HSBC's chief foreign exchange strategist, believe that the US dollar is at the top of the cycle. David Blum

Bloom pointed out that the dollar has risen 40% since its lows in 2011, which is far more than its average gain of 20% for other currencies.

Bloom warned: "we are at the last painful stage of the feast of dollar rise.

It's time to leave. "

Bloom added that the US recently released macroeconomic data is not as good as expected; the US government may not want to let the US dollar appreciate further, because it will have an impact on various areas such as corporate profits and exports, and the market position indicates that the US dollar has overbought.

In addition, he pointed out that the US dollar tends to rise as a result of interest rate increases, but when the Fed does start raising interest rates, the US dollar will not rise further.

Similarly, it may be wrong for the market to judge China's depreciation of the renminbi.

Chen Long, Gave Kal Dragonomics, recently published a paper entitled "do not bet on devaluation of the renminbi" (Don 't Bet on a Renminbi Depreciation), pointing out that "China is a big exception".

One reason is that Beijing has not yet pursued the traditional Asian mercantilist policy, that is, not playing the zero sum game that supports the export of currencies to lower exports.

Of course, China's debt growth is huge and a large portion of its debt is priced in US dollars.

From September 2013 to September 2014, the total cross-border liabilities of Chinese borrowers increased by nearly 40%.

In 2014, China's non Renminbi denominated corporate debt increased from $270 billion in 2008 to $983 billion (over 1/4 of all debt in China was priced in US dollars), according to data from Morgan Stanley (Morgan).

This is a constraint factor, but the main reason why the renminbi will not depreciate significantly is not related to debt, nor even related to capital outflow. Although China has $3 trillion and 800 billion in foreign exchange reserves, the Chinese government is still worried about the capital outflow and is closely monitoring it.

In fact, China has a more long-term and totally different plan.

Unlike most competitors, China now relies on upgrading its position in the value chain, developing innovative technology, and leading edge research to gain competitive advantage.

China is changing the export LED manufacturing mode of its own (and its Asian neighbours), and it will no longer solve the problem quickly by devaluation.

At the same time, China's economic growth is gradually shifting to rely more on domestic demand.

More importantly, China has concluded that the stable and gradual appreciation of the RMB is the best way to challenge the US dollar as the sole hegemony of the world's only reserve currency.

Outside China, there is much doubt about the possibility of such a result, but it is much more determined in China.