BIS: RMB Is Still A Strong Currency.

The latest data released by BIS on Thursday (March 17th) showed that in February, the nominal effective exchange rate index continued to drop to a 1 year low of 123.88, a drop of 0.78% in the month and a slight narrowing from 0.82% last month.

The real effective exchange rate index increased by 0.71% to 130.60, which was 0.35% lower than that of the previous month.

According to statistics released by BIS, 1-2 months are valid.

The cumulative decline was 1.6%, while the real effective exchange rate increased by 0.36%.

Last year, the effective exchange rate of RMB rose 3.93%, and the nominal effective exchange rate rose by 3.66%. It is now rising for 6 years, indicating that the renminbi is still a strong currency.

Cold weather and Spring Festival holiday consumption

The price of food, especially vegetables and meat, has risen sharply, leading to the 2 increase in China's CPI growth in February.

Since the real effective exchange rate is adjusted by inflation, the nominal exchange rate decreases and the real exchange rate rises, indicating that the overall inflation level in China is higher than that in comparable countries.

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Last Saturday (March 12th), Zhou Xiaochuan, President of the PBOC of the Central Bank of China, said earlier that a relatively stable monetary policy and other macroeconomic control measures could achieve the goal of economic growth. Unless there is a major international and domestic risk event, China does not need to adopt excessive monetary policy stimulus, nor will it rely on exchange rate depreciation to improve export competitiveness.

In 2014, the real and nominal effective exchange rate gains slowed down to 6.4% compared with 2013, while the two rose 7.9% and 7.2% respectively in 2013, significantly higher than the 2.2% and 1.7% in 2012.

The effective exchange rate index of BIS is based on the weight of the 2011-2013 year trade data and is based on 2010.

In the weight of the RMB index, the euro, the US dollar and the yen rank the top three.

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On Thursday (March 17th), in the European market, Nomura wrote that the US dollar index had experienced the fastest appreciation since 1980s, and the US dollar index appreciated by nearly 25% in the 6 months from 2016 to January 2016.

The speed and scale of the appreciation of the US dollar have affected the timing and expected acceleration of the Fed's interest rate increase, because the appreciation of the US dollar has had an impact on the outlook of the US economy.

The FED issued a statement on Wednesday (March 16th) after the end of its two day policy meeting. The Federal Open Market Committee (FOMC) maintains that the target range of the federal funds rate remains unchanged at 0.25%-0.5%.

The Fed's interest rate outlook is expected to change at this meeting.

Most policymakers now say they expect a 0.5 percentage point increase in interest rates before the end of this year.

According to the article, Nomura expects the Federal Reserve to continue to raise interest rates, but at present, the interest rate expectations in the financial market for the central bank are very low, which should have been good for the US dollar.

But the dollar is unlikely to repeat its past performance, partly because commodity currencies are unlikely to recur.

This will make the profit margin the main driver of the US dollar.

At the end of the article, if we assume that the market is expected to revalue the Fed raise interest rates (100 basis points per annum), the US dollar index will rise by 11% in 2016.

Our US economists expect to raise interest rates by 50 basis points this year, raising interest rates by 75 basis points next year, and the US dollar index will appreciate by 7%.