Counter Cyclical Adjustment Of Material Strength RMB Will Not Be Disorder.

The RMB exchange rate against the US dollar is approaching the key psychological position.

In the short term, there is a certain cyclical fluctuation in the foreign exchange market. There is overshoot risk in the short-term exchange rate. It is necessary and reasonable to carry out counter cyclical regulation in time and give full play to the role of macro Prudential policy.

In the long run, there is no basis for a substantial depreciation of the RMB, and the possibility of short-term volatility becoming disorderly depreciation is less likely.

The current depreciation of the RMB against the US dollar began in late April, and the incident suddenly became violent.

Market forces have led to the recent adjustment of the RMB exchange rate.

In the current Renminbi devaluation, the offshore renminbi has been in the "front", followed by the RMB exchange rate on the shore, and finally the middle price.

According to statistics, from April 18th to May 17th, offshore RMB against the US dollar spot exchange rate depreciated 2719 points, the amplitude was 4.07%; the offshore renminbi dollar spot exchange rate depreciated 2280 points, the amplitude was 3.41%; the intermediate price devalued 1749 points, the amplitude was 2.61%.

In many market factors, external risks play an important role, and the RMB exchange rate has weakened rapidly because of market sentiment changes.

This is somewhat similar to the rapid devaluation of the renminbi in the two or three quarter of 2018.

The US dollar index strengthened to exert downward pressure on the non US currency exchange rate.

At present, the overall growth of the global economy continues to grow, but the developed economies are showing signs of differentiation. The "us strong European weak" pattern has strengthened signs, and the US dollar index has once again strengthened and once rose by 98.

Judging from the global market, the recent Brazil, real, and so on the dollar has also seen a rapid depreciation of the US dollar in Argentina.

The recent RMB exchange rate adjustment is obviously not intended to guide.

On the contrary, the short-term fluctuation of exchange rate has attracted the attention of related parties.

The central bank's recent monetary policy report pointed out that we should strengthen macro Prudential Management, stabilize market expectations and maintain a basically stable RMB exchange rate at a reasonable and balanced level.

On May 19th, Pan Gongsheng, deputy director of the people's Bank of China and director of the State Administration of foreign exchange, said in an interview with the media that they have the basis, confidence and ability to maintain stable operation of China's foreign exchange market and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

It should be noted that the RMB exchange rate does not exist on the basis of a substantial depreciation.

The economy started well this year, better than expected.

At present, the fundamentals of the economy have not changed significantly. The "wide credit" policy of reducing taxes and lowering fees and supporting the real economy has been gradually improving, and the domestic economic growth is obviously resilience.

In the long run, China's development is still in an important period of strategic opportunities. With sufficient resilience, great potential and continuous burst of innovation, the long-term trend of the economy will not change. The fundamentals of the economy will continue to support the RMB exchange rate effectively.

However, we should also see that the micro economic entities in the territory have not yet fully established the concept of financial neutrality, and the foreign exchange market is prone to a "cyclical rise" and "herd effect", thus exacerbating market volatility.

This has happened many times in the past few years.

In May 20th, the central parity of RMB against the US dollar was cut by 129 basis points, 6.8988, and 12 basis points from 6.9.

The offshore and offshore RMB exchange rate against the US dollar has fallen below 6.9, and the offshore RMB exchange rate has dropped to 6.9486.

The 6.9 is broken, and the next integer pass is 7.

Whenever RMB is approaching 7 against the US dollar, the question of whether or not to break up 7 will cause heated debate in the market. This is no exception.

It is questionable whether the RMB exchange rate must stick to a certain point.

Many market participants believe that 7, as an important "psychological barrier", will be further encouraged by the "herding effect" if it is broken in the short term, which may trigger the overshooting of the RMB exchange rate, and may also exacerbate the volatility of capital flows.

It is reasonable and necessary to give full play to the underpinning function of counter cyclical adjustment.

After the monetary policy report referred to "strengthening macro Prudential Management", Pan Gongsheng said in an interview with the media that according to the changing circumstances, the necessary counter cyclical adjustment measures should be taken to strengthen macro Prudential Management.

In recent years, relevant departments have accumulated rich experience and adequate policy tools in coping with the fluctuation of foreign exchange market. Taking into account that our country has more than US $3 trillion in foreign exchange reserves, it can play a strong support for the RMB exchange rate.