2023-11-22 05:16:00
Original title: Rising above the 7.2 mark, hitting the highest value since August (title)
The RMB exchange rate continues to strengthen (theme)
Beijing Daily reporter Pan Fuda
The RMB exchange rate has shown a continued strengthening trend recently. The People’s Bank of China authorized the China Foreign Exchange Trading Center to announce that on November 21, the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market was 1 US dollar to 7.1406 yuan, the highest since August this year. The 206 basis points increase was the largest since July. .
According to industry analysis, the strengthening of the RMB exchange rate is mainly driven by internal and external factors such as the continued improvement of domestic economic fundamentals, signs of warming in Sino-US relations, and a significant correction in the US dollar index. Zou Lan, director of the Monetary Policy Department of the People’s Bank of China, has emphasized many times recently that as my country’s overall economic performance continues to improve and the pace of opening up of financial markets accelerates, the investment and hedging properties of RMB assets have emerged, and there is a solid foundation for the RMB exchange rate to remain basically stable.
The central parity rate of RMB exchange rate has been rising for several days
On November 20, the onshore and offshore RMB exchange rates once morest the US dollar rose strongly, once regaining the “7.2” mark. The gains continued to expand in the evening, and both rose above the 7.17 mark. On that day, the central parity rate of the RMB exchange rate was 7.1612 yuan per US dollar, an increase of 116 basis points, the largest increase in recent times. On November 21, this record was refreshed once more, with the central parity raised by 206 basis points.
After the central parity rate was released, the offshore RMB exchange rate once morest the US dollar, which more reflected the expectations of international investors, rose sharply. On November 21, the offshore RMB exchange rate once morest the U.S. dollar rose above the 7.15 and 7.14 marks one following another, rising sharply for three consecutive trading days; the spot exchange rate of the RMB once morest the U.S. dollar rose above the 7.14 mark at the opening.
Looking at the longer term, the RMB exchange rate has continued to rise since November, with both onshore and offshore RMB exchange rates rising significantly, rising from 7.32 and 7.34 to around 7.14 respectively. Since the second half of August, the RMB has remained relatively strong once morest a basket of currencies, with an appreciation rate of more than 2%.
In stark contrast, since November, the U.S. dollar index has continued to fluctuate downward, with a cumulative decline of more than 2%. On November 21, the U.S. dollar index reached an intraday low of 103.1767 points, falling below the “104” mark.
Foreign trade companies should avoid unilateral betting
Why has the RMB exchange rate risen strongly recently? Wang Qing, chief macro analyst of Oriental Jincheng, said that in addition to changes in the trend of the US dollar, the current key to determining the strength of the RMB exchange rate is still the domestic macroeconomic and real estate industry trends, and foreign exchange market control measures will also have a greater impact on the fluctuations of the RMB. As policies to stabilize growth continue to be implemented, the domestic macro economy stabilizes, and the internal depreciation pressure on the RMB is also easing.
Zhou Maohua, a macro researcher at the Financial Markets Department of China Everbright Bank, believes that U.S. inflation has dropped more than expected, triggering market bets on the Federal Reserve cutting interest rates next year. As a result, U.S. bond interest rates and the U.S. dollar have plummeted, and the interest rate gap between China and the U.S. has continued to narrow, which is good for the performance of the renminbi. In addition, the fundamental support of the domestic economy, changes in supply and demand in the foreign exchange market, and the gradual recovery of market sentiment all support the RMB exchange rate. More importantly, signs of warming Sino-US relations and the steady advancement of RMB internationalization have boosted market confidence.
For consumers, the appreciation of the RMB means that the cost of overseas study and export tourism will decrease, and the cost of “overseas shopping” denominated in RMB will also decrease, which is generally beneficial. For enterprises, the appreciation of the RMB once morest the US dollar can reduce the costs of import enterprises, but export enterprises will face certain pressures. This is contrary to the previous period when the pressure of RMB depreciation was greater.
“The direction of the foreign exchange market is unpredictable.” Wang Qing reminded that for foreign trade companies, they must adhere to the principle of risk neutrality and avoid unilateral bets. Under the conditions of controllable comprehensive costs, they can consider hedging through financial derivatives in the foreign exchange market. RMB fluctuations reduce foreign exchange risk exposure.
Resolutely guard once morest the risk of exchange rate overshooting
In fact, since the second half of this year, financial regulatory authorities have frequently used the foreign exchange toolbox to resolutely prevent the risk of exchange rate overshooting. On September 11, the National Foreign Exchange Market Self-Discipline Mechanism Special Meeting pointed out that the financial management department has the ability, confidence, and conditions to maintain the basic stability of the RMB exchange rate. The Central Financial Work Conference held at the end of October proposed “strengthening foreign exchange market management and maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level”, which released a clear signal to stabilize the exchange rate.
On November 8, Pan Gongsheng, Governor of the People’s Bank of China and Director of the State Administration of Foreign Exchange, stated that the market should play a decisive role in the formation of exchange rates and that the exchange rate should effectively play the macroeconomic and balance of payments automatic stabilizer function. At the same time, we must resolutely correct procyclical market behavior, resolutely deal with behavior that disrupts market order, and resolutely prevent the risk of exchange rate overshooting. “We have the confidence, ability and conditions to maintain the stable operation of the foreign exchange market and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.” he said.
What is the future trend of the RMB exchange rate? The industry generally expects that the RMB will continue to maintain two-way fluctuations in the future, with a high probability of further stabilization and recovery. The domestic economic recovery process is expected to maintain a stable and positive trend, which will provide strong fundamental support for the RMB exchange rate. Wang Qing believes that overall, with the decline of the US dollar, the RMB is likely to continue to appreciate once morest the US dollar, and the basket of RMB exchange rate indexes that can better reflect the true level of the RMB exchange rate will be mainly stable.
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