RMB Devaluation Has Once Again Become The Focus Of The Market.

There is a dilemma at the moment. A comprehensive intervention in the foreign exchange market is inconsistent with the central bank's desire to achieve a floating exchange rate system, and letting go will leave an opportunity for arbitrage.

Yesterday, the central bank again issued a document reiterated that "there is a foundation to maintain."

"Relatively stable" will undoubtedly give the market a shot in the arm.

A slight difference between the emphasis on "equilibrium exchange rate price" in the new exchange reform is that the "flexible exchange rate system" is more emphasized this time.

Wang Ju, senior foreign currency strategist at HSBC, told reporters that the strategy that the central bank may take in the near future is, on the one hand, allowing the RMB exchange rate to adjust quickly on shore, releasing the pressure of devaluation, and moderately intervening in stabilizing the offshore exchange rate. In this case, we should find out the equilibrium level of the RMB exchange rate between the RMB and the US dollar in the near future, and realize the pition to the flexible exchange rate system.

The renminbi remains basically stable against a basket of currencies.

Since the central bank issued the CFETS RMB exchange rate index in December 11, 2015, it is more consistent with the reference to the setting of the daily middle price and the trend of RMB.

Rather than "soft pegging" policy changes in the US dollar.

CFETS the RMB exchange rate index consists of 13 currencies with different weights.

Among them, the yuan has appreciated 2.5% against the Australian dollar since the beginning of the year, 1.45% against Hong Kong dollar, 3.94% against the Japanese yen, and 0.77% against the euro. As a result of the impact of oil prices, the Russian rouble has been greatly depreciated, so the renminbi has gained a marked appreciation of the rouble.

Liang Dawei, general manager of Standard Chartered China's wealth management department, told reporters that the market was too accustomed to pegging the US dollar in the past. However, at present, the RMB has successfully joined the SDR and compared with more foreign currencies. Looking back over the past year, the euro, which accounts for second of the weight in the CFETS exchange rate index, has not appreciated appreciably against the renminbi.

The latest data released by China foreign exchange trading center in January 4th showed that in December 31, 2015, the CFETS RMB exchange rate index was 100.94, which rose by 0.94% compared with the end of 2014. The RMB exchange rate index, referring to the basket of BIS currencies and the basket of SDR currencies, was 101.71 and 98.84, respectively, representing a 1.71% appreciation and a 1.16% decrease compared with the end of 2014.

The three RMB exchange rate index depreciated two liters, indicating that the RMB maintained a basically stable currency basket in 2015.

For the recent fluctuations in the central parity of RMB against the US dollar, China's currency net commentator said in yesterday's article: "the change in the bilateral exchange rate of the RMB against the US dollar is basically consistent with the direction and magnitude of the US dollar's exchange rate for other major currencies, and the RMB exchange rate remains basically stable for a basket of currencies."

For the RMB exchange rate trend during the year, Wang Xinjie told our reporter that with the opening of the new SDR currency basket in the second half of the year, the renminbi will usher in a new buying basket, and the exchange rate is expected to rise.

In January 7th, under the expectation of many people, the central bank finally forwarded the article to reiterate that "maintaining a relatively stable exchange rate on the basis" has undoubtedly injected the market with a shot in the arm, effectively reversing the haze brought by the fall in the middle price once again.

Yesterday, the central price of the RMB to the U. S. dollar in the largest reduction since 2016, reported 6.5646, down 332 basis points from the previous trading day, leading to a rapid decline of more than 0.5% of the RMB against the dollar after the opening of the exchange rate.

Since January 4th, the central parity of RMB has fallen by 614 basis points, and the depreciation rate has been 1.52%.

Compared with the new exchange rate reform in August 11, 2015, the central parity of RMB against the US dollar fell sharply by 2848 basis points for four consecutive days, and the total depreciation rate was 3%. However, from fifth (August 14th), the middle price stabilized, and the gap between the closing price of the last trading day was narrowed. The spot exchange rate of the renminbi continued to be within 200 points from then until December last year.

As China's currency network commentator published yesterday, the central parity of the RMB against the US dollar and the closing rate of the inter-bank foreign exchange market in the past 5 months are very high.

Since August 11, 2015, the gap between the central parity of the RMB against the US dollar and the closing rate of the inter-bank foreign exchange market has remained at 50 basis points for most of the time, even at a minimum of 1 basis points.

At the end of August 11, 2015 to the end of 2015, the average difference between them was 33 basis points, which was significantly reduced by 874 basis points compared with the average point difference between 2015 and August 10, 2015.

The deviation between the RMB exchange rate and the market exchange rate has been effectively corrected, and the marketization and benchmarking of the middle price have improved significantly.

It is worth noting that yesterday, the offshore market (CNH) RMB exchange rate trend seems to give the RMB exchange rate to the end of the downtrend and return to a stable hope.

Yesterday, the offshore renminbi (CNH) on the market showed a rebound trend towards the US dollar. Although the RMB had a sharp fall in the early morning due to the announcement of the intermediate price, the RMB's appreciation against the US dollar slowly appreciated. At the time of the press release, the yuan rose 6.6906 basis points to the US dollar, a slight increase of 53 basis points, with a magnitude of 0.08%.

"This wave of RMB depreciation will soon hit bottom."

Wang Xinjie, director of China fortune management investment strategy of Standard Chartered Bank, told reporters yesterday that the quicker adjustment of the RMB exchange rate would probably end the downward trend faster, meet the relative stability for a period of time, and avoid the long-term "weak" expectation of the renminbi.

Wang Xinjie believes that, like the "new exchange reform", the central bank's one-off rectification of the renminbi may be more in line with the characteristics of the Chinese market, avoiding excessive speculation and effectively releasing the devaluation pressure.