Source: China Securities Journal China Securities Network
On June 22, the central parity rate of the RMB against the U.S. dollar in the inter-bank foreign exchange market was cut by more than 250 basis points, and the exchange rates of the onshore and offshore RMB against the U.S. dollar followed suit.
Will this trigger a new round of rapid adjustment of the RMB exchange rate? According to industry analysts, the current dollar index is still strong, and the exchange rate of the RMB against the US dollar is easy to fall and difficult to rise. However, with the gradual marginal changes in the internal and external environment, the support force of the RMB exchange rate is expected to be strengthened again, and the probability of another sharp dro is small.
The middle price is one step ahead
The Foreign Exchange Trade Center announced that on June 22, the central parity rate of the RMB against the U.S. dollar was 6.7109 yuan, a decrease of 258 basis points or 0.39% from the previous value.
The previous trading day, the US dollar index fluctuated and flattened, and the exchange rate of the RMB against the US dollar did not show a significant decline. On June 21, the closing price of the onshore RMB exchange rate against the U.S. dollar was 6.6995 yuan at 16:30, and the closing price of the offshore RMB exchange rate against the U.S. dollar was 6.6922 yuan, down 135 basis points and 20 basis points respectively throughout the day, with a small adjustment.
Affected by factors such as the adjustment of the central parity rate, after the opening of the market on the 22nd, the exchange rate of the onshore and offshore RMB against the US dollar has declined. As of 16:30, the closing price of the onshore RMB against the U.S. dollar was 6.7171 yuan, down 176 basis points from the previous closing price and down nearly 300 basis points during the session; the offshore RMB exchange rate against the U.S. dollar was 6.7221 yuan, down from the previous closing price. It was lowered by 299 basis points, and it fell by more than 400 basis points during the session.
Industry insiders analyzed that in recent years, the two-way fluctuation of the RMB exchange rate has increased, which is mainly affected by factors such as international financial market conditions and domestic foreign exchange supply and demand. Since the beginning of this year, the RMB exchange rate has become more flexible, freeing up more space for the implementation of policies.
The first quarter monetary policy implementation report released by the People's Bank of China on May 9 proposed to adhere to a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies, strengthen macro-prudential management of cross-border capital flows, and strengthen expectation management. Market entities shall be guided to establish the concept of "risk neutrality", maintain the normal operation of the foreign exchange market, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
Fundamental factors become "ballast stone"
According to industry analysts, in the short term, while the US dollar index remains strong, the RMB exchange rate may still have some room for adjustment. In the medium and long term, the limited room for the US dollar index to continue to rise and the domestic economy gradually walk out of the bottom will support the stabilization of the RMB exchange rate, and the probability of another sharp depreciation is small.
Guo Qiang, a researcher at the Financial Market Department of China Construction Bank, pointed out that the impact of the Federal Reserve's monetary policy and the fluctuation of the US dollar index on the RMB exchange rate is relatively significant.
Market institutions said that the internal and external environmental factors that have caused the rapid depreciation of the renminbi since April are undergoing marginal changes. In terms of the US dollar index, the South China Futures Research Report pointed out that the “boots” of the Fed’s interest rate hike in June landed, and it is expected that the US dollar index will not break through the high range of 105 to 106 in the short term.
"Although the Fed's monetary policy is still tightening, it has been fully expected by the market. The US economic growth may slow down, and the strength of the US dollar may be weakened." Shanxi Securities Research Report believes that the European Central Bank is expected to raise interest rates. In the case of weakening, the suppression of the RMB exchange rate by the passive appreciation of the US dollar will tend to ease.
From the perspective of domestic economic fundamentals, industry insiders said that with the improvement of the epidemic prevention and control situation and the further increase and implementation of the superimposed and stable growth policy, the economy will gradually walk out of the bottom, and the fundamental factors will continue to act as the "ballast stone" of the RMB exchange rate.
From the perspective of cross-border capital flow, Guan Tao, global chief economist of BOC Securities, said that in May, although foreign-related receipts and payments and foreign exchange settlement and sales under securities investment were both in deficit, trade in goods and direct investment were both in surplus. The total deficit of the former does not equal the total surplus of the latter two, indicating that the balance of payments situation is still good.
Experts predict that the RMB exchange rate will remain basically stable at a reasonable and balanced level in the third quarter. The two-way fluctuation and increased flexibility of the RMB exchange rate will further play the role of an automatic stabilizer for adjusting the balance of payments and demonstrate the function of a macroeconomic "shock absorber".
In the medium and long term, the US dollar index will continue to have limited room for growth and the domestic economy will gradually come out of the bottom, which will support the stabilization of the RMB exchange rate.
