The yuan performed strongly, raising the central parity rate by 419 basis points against the backdrop of the Federal Reserve’s sharp interest rate hike of 75 basis points overnight.
Data from the China Foreign Exchange Trading Center on June 16 showed that the central parity rate of RMB against the US dollar was at 6.7099, an increase of 419 basis points. The central parity rate on the previous trading day was 6.7518, the closing price of onshore RMB was 6.7195 at 16:30, and the night closing price was 6.7158 at 23:30.
The U.S. dollar index has fallen significantly in the past two days and currently remains near 104.9. The highest it climbed to 105.788 the day before, once again hitting a new high in nearly 20 years.
The U.S. Federal Reserve announced a 75 basis point interest rate hike on the 15th, raising the federal funds rate target range to between 1.5% and 1.75%. This is the Fed’s single largest interest rate hike since 1994, demonstrating the urgency of controlling inflation.
Fed Chairman Powell also said that from the current point of view, it is very likely to continue to raise interest rates by 50 basis points or 75 basis points at the next meeting, and the committee will make a decision based on future economic data. He said a 75 basis point interest rate hike was unusual and he did not expect rate hikes of this magnitude to occur often.
The exchange rate market also experienced violent fluctuations, with the offshore RMB soaring sharply. Near the end of Powell’s press conference, the offshore RMB soared more than 800 points against the U.S. dollar, once reaching a daily high of 6.6669 yuan, the largest increase since 2017.
The Mingming team of CITIC Securities stated that in the short term, the RMB is expected to be more affected by market factors. Under the interaction of long and short factors such as the pressure on the US dollar index, improvement in Sino-US trade relations, and corporate foreign exchange settlement and sales behavior, RMB fluctuations may intensify. Or continue to maintain a wide range of shock pattern. After a round of sharp decline, the pressure on RMB depreciation has been fully released. For foreign investors, the risks from the RMB exchange rate have weakened. Coupled with the recent recovery in the A-share market, the A-share market has become more attractive to foreign investment. In the medium to long term, the RMB is expected to return to the dominance of fundamental factors. However, it is worth noting that the strength and pace of economic recovery may become a gaming point for RMB exchange rate fluctuations.
Shanxi Securities’ previous research report pointed out that the RMB exchange rate will stabilize in the medium to long term, and is expected to fluctuate within the range of 6.7 to 6.9 in the third quarter. The probability of a “sudden depreciation” happening again is limited.
</p
