The Renminbi Will Be Further Derogated From The Currency War.

Market participants are working hard to interpret the central bank's policy direction in the post SDR stage from the recent trend of RMB.

This week, more and more signals seem to point to the central bank's more tolerant attitude towards the depreciation of the renminbi.

The continuation and derogation of RMB is necessary for China's balance of trade balance, the re control of domestic monetary situation and the end of deflation cycle.

In fact, the devaluation of the renminbi is not surprising to everyone. Because many people originally predicted that the renminbi would join the IMF SDR, the central bank would depreciate the renminbi.

The Central Bank of China unexpectedly guided the depreciation of the renminbi in August of this year, which triggered the currency competition of Asian countries, and finally led to the collapse of stock markets in various countries.

On Thursday, the Central Bank of China set the central parity of RMB against the US dollar at 6.4236, which in one fell swoop derogated the 6.42 yuan in August.

At present, the market expects that the renminbi will continue to depreciate, so it fears that the war of Asian currencies will be reopened again.

Societe Generale of France said that further weakening of the renminbi could trigger a currency war, or a direct factor that would allow the currency to keep pace with the renminbi.

This is an indirect factor.

Jason Daw and Yao Wei, an analyst at faxing bank, said in a report that if the depreciation of the RMB accelerates or the volatility rises sharply, the stability of the whole emerging market currency portfolio may be shaken.

The expansion of offshore RMB exchange rate reflects the change of offshore renminbi position, which in turn reflects the expectations of participants in onshore market.

The baseline situation of the forecast is that the US dollar / RMB will gradually rise to 6.80 at the end of 2016, and there will be a relatively stable period.

Chang Wei Liang, Mizuho Bank's foreign exchange strategist, said recently that the yuan had once again derogated the 6.42 yuan level in the 8 months, and the market began to suspect that the central bank was acquiescence in the depreciation trend of the renminbi.

If so, the currencies representing emerging markets in Asia will compete to maintain their own trade.

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Overall, Asian countries do not hate their country, says Nizam Idris, director of strategy at Magri (Macquarie).

Because many countries rely heavily on exports, devaluation is not always a bad thing.

The devaluation of China's currency is not all the reason for the weakening of Asian currencies, but it is a catalyst.

Countries that depend on exports, such as South Korea, are deeply affected by the devaluation of the renminbi, but Li Zhulie, President of the Bank of Korea, said at a news conference today that it is not expected that the renminbi will continue to depreciate and that South Korea and China have signed FTA.

In a statement last week, the Chinese people pointed out that the foundation of the renminbi has not continued to depreciate. However, if China's economic situation and the low producer price index (PPI) are observed, the Central Bank of China may not have much choice.