The Central Bank Responded To The RMB Exchange Rate "Breaking 7" Exchange Rate Mechanism Will Continue To Play A "Stabilizer" Function.

Editor's note: the RMB to us dollar spot rate and offshore exchange rate both broke 7 in the morning of August 5th. In this regard, the central bank official said that the exchange rate mechanism will continue to play a "stabilizer" function. At the same time, some economists say there is no need to take "7" too seriously. Today, this newspaper focuses on the RMB exchange rate "breaking 7" to see how experts interpret the exchange rate changes and future trends.


In August 5th, the offshore RMB exchange rate and the offshore RMB exchange rate were both "broken 7". Around 9:15 a.m., the offshore RMB against the US dollar fell below the 7 pass, and the lowest value was 7.1092 at 9:40. Meanwhile, the RMB against the US dollar also fell below 7 yuan, and the lowest value was 7.0474.


As at 19 hours in August 5th, the RMB on the shore was 7.0421 against the US dollar, and the offshore renminbi against the US dollar was 7.0902.


In addition, according to the China foreign exchange trading center, in August 5th, the central parity of RMB against the US dollar was 6.9225, down 229 points. The price also hit a new low since last December 3rd. On the previous day, the central parity of RMB against the US dollar was 6.8996, and the 16:30 closing price was 6.9413.


With regard to the reasons for "breaking 7" of the RMB exchange rate, the central bank official said that in August 5th, influenced by unilateralism and protectionist measures and tariff expectations on China, the RMB depreciated against the US dollar and broke through 7 yuan. However, the RMB remained stable and strong against a basket of currencies. This is a reflection of market supply and demand and international exchange market fluctuations.


Regarding the RMB exchange rate "breaking 7" trend, the central bank has the person in charge said that the renminbi exchange rate trend will depend on the fundamentals for a long time. In the short term, the market supply and demand and the US dollar trend will also have the bigger influence. The marketization of exchange rate formation mechanism is conducive to the role of price leverage in regulating the balance between supply and demand, and plays an important role in regulating the "automatic stabilizer" of the economy and the balance of payments. As a big country, China has a wide range of manufacturing industries, a relatively sound industrial system, strong competitiveness in the export sector, and moderate import dependence. The RMB exchange rate volatility has a strong regulatory effect on China's balance of payments, and the foreign exchange market itself will find a balance.


Central bank officials said that in recent years, in response to exchange rate fluctuations, the PBC has accumulated rich experience and policy tools, and will continue to innovate and enrich the control toolbox. In view of the positive feedback behavior that may arise in the foreign exchange market, we must take necessary and targeted measures to resolutely crack down on short-term speculative speculation, maintain stable operation of the foreign exchange market and stabilize market expectations. The people's Bank of China has experience, confidence and ability to maintain a basically stable RMB exchange rate at a reasonable and balanced level.


What is the impact of RMB exchange rate "breaking 7" on enterprises and residents? The person in charge said that for the ordinary people, over the past 20 years, the RMB rose to the dollar and a basket of currencies at a time of much and less time. The main financial assets of the Chinese people in the renminbi were best protected, and their external purchasing power increased steadily, all of which can be reflected from the common people's traveling abroad, overseas shopping and children's overseas schooling. The same is true for businesses. We do not want companies to expose too much to exchange rate risk, and to support enterprises to purchase exchange rate hedging products to avoid exchange rate risk. At the same time, we should also see that the RMB exchange rate is likely to depreciate or to appreciate. The two way floating is normal. It is not only for enterprises, even more professional financial institutions, can hardly predict the trend of exchange rate. Therefore, we suggest that we should focus on the entity business and do not spend too much energy on judging or opportunistic exchange rate trends. We should set up a financial concept of "risk neutral". We should aim to lock in foreign exchange costs, reduce the uncertainty of production and operation, and realize the main business profits instead of taking profits from foreign exchange derivatives trading as the purpose.