On May 25, the spot exchange rate of the US dollar against the RMB rose, breaking through the 6.4 yuan mark during the session, hitting a new high since June 2018.
Data from the China Foreign Exchange Trading Center shows that on May 14, 2021, the CFETS RMB exchange rate index reached a high of 97.34, compared with the low of 91.42 on July 31, 2020 , an increase of 6.48%; the RMB exchange rate index calculated by the BIS currency basket and the SDR currency basket also reached highs of 101.41 and 96.16 respectively. Although the exchange rates of the three major RMBs have fallen slightly as of the 21st, they are still at high levels.
Screenshot of China Foreign Exchange Trading Center website
RMB returns to appreciation channel The overall trend has attracted strong attention from the market and public opinion.
Since April, the RMB has returned to a stronger trend
Data shows From the beginning of this year to mid-February, the RMB exchange rate against the US dollar rose strongly, appreciating from 6.5408 to a maximum of 6.43. From late February to the end of March, the RMB exchange rate fell under pressure, with a depreciation range of approximately 1.8%. The USD/CNY spot exchange rate rose from 6.45 on February 25 to 6.57 on March 30.
Since April, the exchange rate of RMB against the US dollar has continued to heat up, returning to the appreciation channel, with a cumulative appreciation rate of more than 2%. As of May 20, the spot exchange rate of the U.S. dollar against the yuan recorded 6.44, down approximately 1.98% from the 2021 high.
As of the 25th, the offshore and onshore RMB rose above 6.40 and 6.41 respectively, both hitting new highs in the past three years.
The exchange rate of RMB against the US dollar rose above 6.4 during the session, screenshot of data from Investing website (Beijing time 19 (At about 40 minutes)
In addition, according to data from the China Foreign Exchange Trading Center, on the 25th, the central parity rate of RMB against the US dollar was reported at 6.4283, an increase of 125 basis points, and the trend was positive.
Screenshot of China Foreign Exchange Trading Center
The U.S. dollar weakened due to over-issuance, while the renminbi strengthened
Industry insiders believe that behind this wave of rise are factors such as the epidemic, the over-issuance of the U.S. dollar, and the continued improvement of China’s economy The result of the combined action of multiple factors.
Gao Desheng, a senior financial professional and independent economist, told Observer.com today (25th): “The recent appreciation of the RMB against the US dollar is related to the weakening of the US dollar index. As the US dollar Inflation is rising rapidly, bond yields are rising sharply, and employment indicators are seriously lower than expected. The U.S. dollar index has fallen below 90 again, depreciating against major currencies such as the euro.”
Tang Jianwei, chief researcher of the Bank of Communications Financial Research Center, believes that the new crown epidemic has caused significant fluctuations in the U.S. dollar index, which is the main reason for the two-way fluctuations in the RMB exchange rate against the U.S. dollar; the difference in economic growth between China and the United States is the fundamental factor behind exchange rate fluctuations; China The differences in the direction and intensity of monetary policies between the United States and the United States have led to fluctuations in interest rates between China and the United States, which is a policy factor for exchange rate fluctuations.
In the view of Scotiabank strategist Gao Qi, the main reason today is the weakness of the US dollar. In addition, large capital inflows from the stock market have also pushed up the yuan. On the 25th, net foreign purchases of A-shares exceeded 21.7 billion yuan, setting a new record for northbound single-day net inflows; the CSI 300 Index rose 3.2%, hitting a new high since March.
In fact, as early as April this year, Zhou Chengjun, director of the Financial Research Institute of the People’s Bank of China, made a judgment when attending the Moganshan Conference: Overall, the RMB against the US dollar is It will continue to appreciate against the US dollar in the medium to long term. “This is not only the result of the continued growth of China’s economy and the continuous improvement of the relative purchasing power of the RMB, but also one of the consequences of the Federal Reserve’s quantitative easing and continuous expansion of its balance sheet.”
There is “stability” in “rising”. Where is the RMB headed?
Gao Desheng further stated that the appreciation of the RMB exchange rate reflects the rapid growth of China’s exports and responds to the actual demand of the market; at the same time, this is also in line with the “marketization” advocated by the People’s Bank of China. “Exchange rate formation mechanism, as well as policy guidance to increase two-way fluctuations.
On May 21, the Financial Stability and Development Committee of the State Council held its 51st meeting, calling for further promoting the market-oriented reform of interest rates and exchange rates and maintaining the RMB exchange rate at a reasonable and balanced level. Stablize.
On May 23, Liu Guoqiang, Deputy Governor of the People’s Bank of China, answered reporters’ questions on the issue of RMB exchange rate. Liu Guoqiang pointed out that since the beginning of this year, the RMB exchange rate has risen and fallen, floating in both directions, and has remained basically stable at a reasonable and balanced level. At present, my country’s foreign exchange market is autonomously balanced, the RMB exchange rate is determined by the market, and exchange rate expectations are stable. The future trend of the RMB exchange rate will continue to depend on market supply and demand and changes in the international financial market, and two-way fluctuations will become the norm.
“The People’s Bank of China will focus on expected guidance, play the role of the exchange rate as an automatic stabilizer in regulating macroeconomics and the balance of payments, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.”
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Lu Jinzhong, director of the Survey and Research Department of the Shanghai Headquarters of the People’s Bank of China, also published an article in “China Finance” (Issue 10, 2021): From the perspective of trends, short-termThe expansion of demand in the current period is limited and the supply elasticity is relatively large. The periodic supply and demand gap may be repaired, but the mid- to long-term upward trend in prices may have taken shape.
Lv Jinzhong suggested adhering to a prudent monetary policy, focusing on import and export balance, enhancing exchange rate flexibility, appreciating the RMB appropriately, and resisting imported effects; he suggested studying and improving the CPI accounting method to reflect the true level of inflation. “From the current perspective, it is necessary to take inflation into account in asset prices.”
The positive signal sent by the central bank this time has been welcomed and responded to by people in the industry.
He said, “While epidemics are still surging around the world and plaguing global supply, China leads the world in epidemic prevention and control, and China’s industrial chain has become a safe island for the global supply chain. , the demand for Chinese products has been promising, and China’s exports have maintained higher-than-expected growth in the first four months. In an environment of raging global inflation, RMB appreciation will help lower imported inflation and reduce the cost of imported raw materials.”
Industrial workers on a mechanical and electrical equipment production line, Xinhua News Agency photo
In RMB On the issue of future trends, the industry holds different opinions.
Guan Tao, an analyst at Bank of China Securities, reminded that the average RMB exchange rate and the RMB effective exchange rate index in April fell from the previous month, showing the financial impact of exchange rate changes on enterprises and their export competitiveness. The impact has been mitigated. Although the RMB exchange rate appreciation has resumed, the RMB exchange rate expectations in April and the offshore exchange rate relative to the onshore exchange rate are still biased towards depreciation, which once again shows that RMB appreciation does not mean that there is an appreciation expectation.
Wang Youxin, a senior researcher at the Bank of China Research Institute, analyzed that the domestic positive factors supporting the RMB exchange rate will continue to play a role in the second half of the year, but the uncertainty of the external market will cause the RMB to become more two-way. Characteristics of fluctuations and wide range oscillations.
Many practitioners pointed out that the RMB exchange rate still has the momentum to strengthen and continue to be optimistic about the expectations of RMB appreciation.
Ming Ming, deputy director of CITIC Securities Research Institute, believes that with the enhancement of China’s own economic strength, the internationalization of the RMB and the continued opening of the financial market, the two-way fluctuation characteristics of the RMB exchange rate will be enhanced. , the RMB exchange rate will be more market-oriented. The RMB exchange rate still has the momentum to strengthen, and the USD/CNY exchange rate may fall to 6.2. Gao Qi also intends to continue to hold a short position on USD/CNH and adjust the target price to 6.30 from the previous 6.4.
“Looking at the long-term trend, as China promotes a new domestic and international dual-circulation development pattern, China’s economy develops with high quality, and the global economic pattern rises in the east and falls in the west, the RMB continues to increase significantly. The trend of appreciation is irreversible and unstoppable,” Gao Desheng said. </p
