The RMB Exchange Rate Index Has Caused Great Concern In The Market

Recently, the yuan continued to fall, and after the announcement of the new index, "one stone stirred up thousands of waves".

As of last Friday, offshore RMB against the US dollar fell below 6.56, breaking a new low of four years.

On the shore, the renminbi fell six times, and the weekly decline was the largest since the new exchange reform in August.

According to the analysis of foreign banks, the new index is released to decouple the RMB from the US dollar and open the way for the depreciation of the RMB.

Wall Street reported that:

Goldman Sachs believes that China's first CFETS RMB exchange rate index may be a green light for regulators to weaken the renminbi, so that the renminbi is no longer just pegged to the US dollar, and the regulatory authorities are more likely to adjust the impact of the stronger US dollar.

Under the control idea that RMB does not have the basis of long-term depreciation, the effective exchange rate appreciation of 1% corresponds to 5% against the US dollar, 2% against the Japanese yen and 6% against the euro.

Referring to the 2015, the RMB depreciated by 5% to 6.5 against the US dollar. The effective exchange rate of CFETS can still be appreciated by 1%, of which 0.5% is appreciated by the developed countries and 1.7% is appreciated by the developing countries.

In 2015, the general changes in developed countries were 5% depreciation of the US, 2% depreciation against Japan and 6% appreciation for Europe.

Mark Williams, chief economist of Kay investment, pointed out that the CFETS

The timing of the index announcement is important, just as the Fed may push the US dollar to raise interest rates.

If the renminbi continues to weaken against the backdrop of a stronger dollar, it should not be automatically interpreted as depreciation.

So what is the difference between the RMB basket and the SDR basket of currencies compared with the BIS and the impact on the trend of the RMB? For this reason, under the control idea that the RMB does not have the long-term depreciation basis, the effective exchange rate appreciation of 1% corresponds to the depreciation of 5% against the US dollar and the yen.

2%; 6% appreciation against the euro.

Through a detailed comparison of the weight of the mainstream basket of currencies, state securities analysis said, compared with the BIS effective exchange rate index, CFETS country correlation is higher (currency category: 13 vs 40), the weight of the United States is high (26 vs 18), and the main developed countries (Europe, America, Japan and Britain 66 vs 54) have a high weight, while Southeast Asia (New Matai) and Russia have a higher weight (16 vs 8.8 8.8), and the currencies of South America and the Middle East are not listed, while the SDR basket is mainly developed countries.

The domestic tide rate index is essentially a replica of BIS.

State Securities said in its research report that CFETS is effective.

The formation of high correlation between countries can not only reflect the depreciation of the United States, nor expand the appreciation of resources commodity countries' currencies.

By the end of November 2015, under the weight of CFETS, BIS and SDR, the effective exchange rate of RMB has appreciated by 2.93, 3.5 and 1.56 respectively, and the CFETS performance is in the middle, so it is more objective.