On the 15th, the central parity rate of RMB against the US dollar increased by 174 basis points to 6.8632, the largest increase in three weeks. The spot exchange rates of the onshore and offshore RMB both stabilized, and the price difference between the two places remained low. Analysts pointed out that although the Fed’s interest rate hike process is relatively certain, in the short term, considering factors such as Trump’s opposition to a strong dollar, the great variables in the implementation of Trump’s New Deal, and uncertainty in Europe, the dollar’s continued upward momentum is limited. , at the same time, China’s economic fundamentals have stabilized and the margins of monetary policy have tightened, which overall will help support the continued stable operation of RMB exchange rate. Overall, the RMB exchange rate is expected to maintain the recent range-bound fluctuation pattern in the coming period. However, as expectations for subsequent interest rate hikes by the Federal Reserve increase, it is expected that the pressure for RMB depreciation may increase by then.
The RMB exchange rate continues to stabilize
On February 15, the central parity rate of the RMB against the U.S. dollar in the interbank foreign exchange market was 6.8632, a significant increase of 174 basis points from the previous trading day, an increase of nearly three times. The biggest in weeks.
Affected by the sharp rise in the central parity rate, the spot exchange rate of RMB against the US dollar opened lower and moved higher yesterday. It rose 54 basis points to 6.8620 in early trading. However, the increase narrowed due to the rise of the US dollar in the afternoon. As of 16:30, the exchange rate of RMB against the US dollar closed at 16:30. 6.8672, up 2 basis points from the previous trading day. In the Hong Kong market, the offshore RMB exchange rate against the US dollar also showed strong fluctuations yesterday. As of 16:30 on the 15th, Beijing time, the offshore RMB rose 23 basis points to 6.8561 yuan.
After the Spring Festival holiday, the RMB exchange rate overall continued the stable performance before the holiday. In the nine trading days as of yesterday’s close, the central parity rate of RMB against the U.S. dollar changed from 6.8556 to 6.8632, a cumulative decrease of 44 basis points or 0.06%; the onshore RMB against U.S. dollar exchange rate increased from the opening price of 6.8650 on the first trading day after the Spring Festival holiday to yesterday. The closing price was 6.8672, down only 22 basis points or 0.03%.
Recently, the exchange rate of offshore RMB against the US dollar has fluctuated more obviously. From February 7th to 13th, the offshore RMB exchange rate weakened for 5 consecutive trading days, with a cumulative decline of 720 basis points in the 5th day. However, on February 14th, the offshore RMB exchange rate weakened for 5 consecutive trading days. The RMB rebounded sharply by 140 basis points and maintained its rebound trend yesterday.
The offshore RMB exchange rate has weakened significantly recently, which is obviously dragged down by the rise in the US dollar index. Since February, the U.S. dollar has returned to a strong pattern. After rising all the way in the past 10 trading days, it has returned to 101, with a cumulative increase of nearly 2% during this period, which has put considerable pressure on the RMB exchange rate.
Analysts pointed out that following the continued decline in January, the U.S. dollar index has stopped falling and rebounded recently, mainly due to the upcoming announcement of Trump’s tax reform measures, the European Central Bank’s unpreparedness to exit its quantitative easing policy, and technical rebounds. Against this background, emerging market currencies have generally depreciated against the U.S. dollar recently. Although the offshore RMB has weakened against the U.S. dollar recently, benefiting from the support of China’s economic fundamentals, the overall exchange rate of RMB against the U.S. dollar has continued the pattern of smooth operation before the holiday. .
The US dollar is expected to remain volatile in the short term
Judging from external factors, the current focus of the exchange rate market is still on when the Federal Reserve will raise interest rates. Market participants pointed out that the recently released U.S. economic data were positive, and Federal Reserve Chair Janet Yellen’s latest statement was “hawkish”, leading to market expectations for interest rate hikes starting in the second quarter. Expectations have increased, the US dollar is expected to continue to be strong in the medium term, and the pressure for RMB depreciation still exists.
On February 14, Federal Reserve Chairman Yellen stated in her semi-annual testimony to the U.S. Senate that the U.S. economy is moving in the expected direction and that the Federal Reserve will discuss whether to raise interest rates again at the next few regular monetary policy meetings. She said the Fed expects the U.S. economy will continue to maintain moderate growth momentum, the job market will continue to improve, and the inflation rate will continue to pick up. Yellen once again emphasized that the current economic situation determines the futureThe pace of gradual interest rate increases is appropriate.
“This time Yellen’s speech was hawkish, and the possibility of raising interest rates in March has increased, but we maintain the judgment of the next interest rate hike in June and two rate hikes in 2017.” Guotai Junan Securities Commentary stated that Yellen’s speech showed that further interest rate hikes will be considered at the next FOMC meeting (March 14-15), implying that there is a high chance of raising interest rates three times this year. Yellen said she didn’t want to wait too long, but she didn’t appear “rushed.” Considering the Fed’s “good communication skills”, it usually releases relatively clear signals before raising interest rates. Currently, the meeting in mid-March is only one month away. The March interest rate hike will be a big surprise and is not conducive to the stability of the financial market. .
Shenwan Hongyuan Securities further stated that the Fed’s choice of interest rate hike path mainly depends on U.S. economic growth and inflation. After Trump came to power, the policy implementation process has been controversial. Continuously, coupled with the impact of the strong U.S. dollar on U.S. net exports, tax cuts and infrastructure plans challenging the U.S. fiscal deficit, and other issues are gradually becoming more prominent, the implementation of Trump’s policies and U.S. economic growth may not be as optimistic as market expectations. It is expected that the U.S. dollar currently includes the market’s optimistic expectations. , It is difficult for U.S. bond yields to rise further. Trump will announce details of his tax cut plan in the near future, which may intensify the volatility of the U.S. dollar and U.S. debt in the short term.
Yellen’s speech boosted market expectations for the Federal Reserve to speed up interest rate hikes. After Yellen’s testimony was released, the U.S. dollar index quickly rose above 101.2, and the 10-year U.S. bond yield once rose to 2.5%. Germany, Britain, France, etc.Treasury bond market yields have also been pushed up simultaneously.
However, institutional analysis pointed out that although the Fed’s interest rate hike process is relatively certain, in the short term, considering that Trump expressed his opposition to the strong dollar after taking office, and there are great variables in the implementation of Trump’s New Deal, plus France, Germany, etc. Uncertainty brought about by changes in the general elections in major European countries and the outlook for the European Central Bank’s monetary policy, the US dollar is expected to remain volatile in the short term, and the overall pressure on the RMB exchange rate is limited.
Fundamental support has strengthened
Returning to the domestic perspective, the recent release of a series of economic data has once again verified that my country’s economy continues to stabilize, and domestic monetary policy is neutral and tight, which will further support the short-term stabilization of the RMB exchange rate. Market expectations of RMB depreciation have also declined. Industry insiders predict that the RMB exchange rate is expected to maintain the recent range-bound fluctuation pattern in the coming period.
From a macro perspective, domestic and foreign reserves and Import and export data have a relatively positive impact on the RMB exchange rate as a whole. First, although foreign exchange reserves fell below US$3 trillion in January, the decline narrowed to US$12.3 billion. Compared with the same period last year, JanuaryThe scale of foreign exchange reserves dropped by US$87.2 billion; compared with the previous month, the scale of foreign exchange reserves dropped by US$28.8 billion, and the decline rate was significantly narrowed, which reflects that ChinaCross-border capital outflows have slowed down compared to the previous period and will tend to be balanced in the future. Second, my country’s total import and export value in January was 2.18 trillion yuan, a year-on-year increase of 19.6%. Imports increased by 25.2% year-on-year, and exports increased by 15.9% year-on-year. Both far exceeded expectations, reflecting the significant improvement in domestic and international demand. The trade surplus increased to 354.53 billion yuan in January, which will help alleviate the downward pressure on foreign reserves.
In addition, the neutrality of monetary policy has tightened, and the rise in policy interest rates will also help alleviate the pressure of capital outflows. In early February, the central bank successively raised interest rates on reverse repurchase, MLF, and SLF monetary policies. Although this round of interest rate increases is mostly aimed at risk prevention and deleveraging, the interest rate differential between China and the United States is still limited. Re-expansion will help enhance the attractiveness of RMB assets, reduce the outflow pressure of domestic capital, and also help stabilize the RMB exchange rate.
Analysts pointed out that due to the overall improvement of the global economy and the relative stabilization of the domestic economy, foreign trade is expected to continue the recovery trend in the short and medium term, and the downward pressure on foreign reserves is expected to be alleviated, which will provide support for the RMB.
“In the short term, as the pressure on capital outflows is reduced, the trend of the RMB will be relatively stable; in the long term, the fundamentals of my country’s economy continuing to maintain medium-to-high growth have not changed, which will make the RMB a strong player in the global monetary system. Currency lays the foundation.” China Merchants Securities said.
Shenwan Hongyuan Securities further pointed out that although the uncertainty of the global economy, inflation and monetary policy has increased in 2017, on the one hand, the US dollar index showed overly optimistic expectations in the early stage, and subsequently Facing shock correction; on the other hand, in the context of the capital account not being fully open, as China’s international balance of payments structure continues to improve, capital outflow pressure has eased, and the pressure on RMB depreciation in 2017 has been fundamentally weakened. In this process, the central bank has The intervention capability of the exchange rate has been improved and the cost of intervention has been reduced. As a result, the central bank’s exchange rate policy objectives will become the main factor that dominates the RMB exchange rate in 2017. The pressure on RMB depreciation in 2017 will be significantly alleviated compared with 2015-2016.
From a comprehensive institutional perspective, the uncertainty of the U.S. dollar trend in the short term may intensify exchange rate market fluctuations. The stabilization of domestic economic fundamentals and the marginal tightening of monetary policy will help alleviate the pressure on RMB depreciation. The RMB exchange rate will continue to remain stable in the short term. However, as expectations for subsequent interest rate hikes by the Federal Reserve increase, it is expected that the pressure for RMB depreciation may increase by then.
(Original title: The US dollar remains volatile, the domestic economy stabilizes, and the RMB exchange rate is expected to remain range-bound)
(Editor: DF309)
International tightening, etc., will help alleviate the pressure on RMB depreciation, and the RMB exchange rate will continue to run stably in the short term. However, as expectations for subsequent interest rate hikes by the Federal Reserve increase, it is expected that the pressure on RMB depreciation may increase by then.
(Original title: The US dollar remains volatile, the domestic economy stabilizes, and the RMB exchange rate is expected to remain range-bound)
(Editor: DF309)
