There Is A High Correlation Between The RMB Exchange Rate And The Trend Of The Dollar Index

Recently, the external pressure has slowed down and the internal underpinning force has taken the renminbi away from the fast track of the early stage.

As the saying goes, there are too many things.

In the first 11 months of this year, the central parity of the RMB against the US dollar has depreciated by 3929 basis points, with a magnitude of 6.05%.

By the end of this year, the RMB exchange rate against the US dollar is expected to usher in a rest period.

Beginning in early October, the US dollar index set off the longest and most violent appreciation in the year as the Fed continued to raise interest rates at the end of the year.

In October, the US dollar index rose 3.05% to 98 yuan.

In November, influenced by many factors such as the continued optimism of the US economy and Trump's victory in the US presidential election, the market further anticipated the Fed's interest rate hike in December. There were also some changes in the expectation of the US Federal Reserve raising interest rate and frequency. The US dollar continued to grow strongly, the US dollar index rose 3.28% in November, and in November 24th it was once higher to 102.05 over the past fourteen years.

This round of US dollar index continued to rise, corresponding to the continuous depreciation of the RMB against the US dollar. At the end of November, the exchange rate of the US dollar index and the US dollar exchange rate had shifted back to the callback arrangement at the beginning stage. The operation trend and the steering node were basically the same, which fully demonstrated the role of the US dollar in the depreciation of the RMB against the US dollar in this round.

Recently, the US dollar has shifted to a high level in the international market, which undoubtedly created an opportunity for the RMB exchange rate to stabilize and stabilize.

However, since the beginning of October, the RMB exchange rate against the US dollar has fallen below 6.7, 6.8 and 6.9, and the "brakes" on the nodes "sprint" to the 7 yuan mark have been "brakes". It is easy for people to link the recent RMB stabilization and the entry of integer points.

This support is both technical and psychological.

As a matter of fact, when the renminbi falls all the way, the market has never stopped the speculation on the related aspects.

Many market institutions believe that the devaluation of the RMB is easy to form negative feedback between exchange rate depreciation and capital outflow, which will exacerbate the fluctuation of exchange rate and capital flows.

Therefore, it is necessary to adjust the depreciation rate of RMB against the US dollar in a timely manner.

It is not difficult to see the efforts of the monetary authorities to stabilize the exchange rate in the recent slowdown in the external storage data.

Central bank data showed that in November, China's official foreign exchange reserve dropped from $45 billion 700 million in October to $69 billion 100 million, which is the fifth month decline in foreign reserves, and the fall has reached a new high since January.

Safe officials believe that four reasons have led to a sharp decline in foreign reserves in November, and the first is the operation of the central bank in the foreign exchange market.

Insiders explained that it is not hard to predict that the central bank's foreign exchange holdings will also decrease significantly in November.

CICC report also pointed out that the average daily trading volume of interbank foreign exchange market in November was more than 30 billion US dollars, a record high since September last year.

The central bank may strengthen foreign exchange intervention to avoid overshooting the renminbi and maintain its basically stable exchange rate for a basket of currencies.

In addition to releasing the liquidity of the US dollar, recent news about the implementation of window guidance by foreign exchange management departments and tightening capital controls is also common.

Bloomberg reported 8 days ago that the safe issued a "window guidance" to control capital outflow. According to the guidance, cross-border capital outflow of more than US $5 million under capital terms must be examined and approved.

First of all, at this stage, the market is right.

The expectation of raising interest rates in December has been consistent. Recently, the appreciation of the US dollar has fully reflected the possible change of the US Federal Reserve's interest rate hike in December and even the future interest rate hike. Moreover, the impact of the referendum failure in Italy has already been reflected. Unless the Federal Reserve increases its economic forecast and policy foresight in the future, the US dollar may face the problem of insufficient driving power, and may even have a callback after the rise of the "boots".

Secondly, market information shows that the big banks are continuing to provide us dollar liquidity and consolidating the RMB exchange rate stabilization trend. In the face of integer entry, the willingness of the relevant parties to maintain the stability of the exchange rate may still be strong. At the same time, the external control department may further tighten capital control to cope with capital outflow in the future, and accordingly, the devaluation pressure of the RMB may also be controlled.

Moreover, the recent positive changes and highlights in the domestic economic operation have increased steadily, and industry, investment and consumption have steadily increased, and the service industry has developed rapidly. In November, the official manufacturing PMI rose further to 51.7. Historically, the fourth quarter is often the peak season for export in China. The customs General Administration's 8 day data show that in November, the export volume of US dollar denominated exports increased by 0.1% over the same period last year, and imports increased by 6.7% over the same period last year, which is better than the market expected median level.

It fell slightly to $44 billion 600 million, but maintained at a historically high level.

Economic stability and favorable balance of trade remain a strong basic support for the RMB exchange rate.

Finally, with the opening of the bond market and the accession of the RMB to SDR, the positive role of foreign investors' holdings of RMB bonds will also gradually appear.

According to the latest issuance of the November bond trusteeship by the central government's debt and supernatant, despite the rapid depreciation of the RMB exchange rate and the adjustment of the bond market in November, offshore institutions still increased their holdings of RMB bonds by 15 billion 600 million yuan in the month, 350 million yuan more than in October. Since March of this year, foreign institutions have increased their holdings of RMB bonds to more than 210 billion yuan.

However, the industry has warned that the amount of foreign exchange purchased by US $50 thousand per year will be reset, and foreign exchange demand may increase at the same time. At the same time, the increase in outbound tourism before and after the spring festival may also lead to a seasonal increase in demand for foreign exchange purchase. Therefore, over the next year, the RMB exchange rate pressure will be increased again.

However, the government still has more than 3 trillion yuan of foreign exchange reserves, and a rich policy reserve to deal with the depreciation of the exchange rate. In addition, China is still a capital controlled country. Under the capital account of RMB, it can not be freely convertible. Even if the RMB revaluation process is not over, the future adjustment will not be out of control.

Moreover, in the main non US currencies, the RMB exchange rate is relatively strong in the near future. In the future, with the improvement of economic fundamentals and the control of financial risks, the RMB will maintain a relatively strong character.

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