What happened? There was a slight dive before the RMB suddenly surged 700 points and reversed.

 What happened? There was a slight dive before the RMB suddenly surged 700 points and reversed.

Surprisingly, just a few hours later, the offshore renminbi showed a short-term surge, rebounding more than 700 basis points in the day, and the exchange rate rose above the 7.10 threshold. At the same time, there are some signs of easing trade frictions.

For international investors, the RMB exchange rate, which originally dived, rebounded strongly after a short-term dip. This may also mean that market sentiment on the periphery is changing.

Accidental reversal after short dive

Offshore RMB soared 700 points

After the opening of the morning trading today, the short-term dive of the offshore RMB exchange rate against the US dollar caused an unexpected reversal.

At about 10:10 a.m. on October 10, the offshore exchange rate of RMB against the US dollar suddenly appeared a reversal and a rapid rise, reaching a maximum of 7.1679, 733 basis points compared with the lowest rebound in the day.

According to data from China Foreign Exchange Trading Center, the mid-price of RMB against US dollar was 7.0730 on October 10, down 2 basis points from the previous trading day. The median price on the previous trading day was 7.0728.

Large Short-term Fluctuations in Exchange Rate Market

Renminbi assets were once affected

In fact, just a few hours ago, the offshore renminbi market was not such a short-term soaring reversal.

At the opening of todays morning trading, the offshore RMB exchange rate against the US dollar fell below the 7.14, 7.15 and 7.16 levels. At around 7:00 on October 10, the offshore renminbi fell to the lowest level of 7.1679 against the dollar.

At the same time, the dollar index and gold have also shown a weakening trend.

Earlier today, there were still many investors worried that RMB assets might be synchronized with the huge fluctuations in the peripheral market downward trend. Hours later, a sharp reversal in the offshore renminbi market weakened this concern.

Some market participants speculate that the positive changes in the foreign exchange market will also mean that international investorsexpectations of the economic and trade situation are changing to a better one.

The latest foreign reserves amount to 3092.4 billion US dollars

The stability of the foreign exchange market and the positive changes that have taken place also make international investors more and more confident in the Chinese market.

On October 6, the data released by the State Administration of Foreign Exchange showed that by the end of September 2019, Chinas foreign exchange reserve was $309.24 billion, up by $19.7 billion, or 0.6% from the beginning of the year.

It is reported that supply and demand in Chinas foreign exchange market maintained a basic balance in September. Influenced by global economic growth, monetary policies of major central banks, Global trade situation and geopolitical factors, the US dollar index rose and bond prices of major countries fell. The scale of foreign exchange reserve is affected by exchange rate conversion and asset price changes.

Wang Chunying, spokesman and chief economist of the State Administration of Foreign Exchange, said that with the continuous development of Chinas economy and trade, the currency structure of foreign exchange reserve is becoming more diversified and more dispersed than the average level of global foreign exchange reserve. This is not only in line with Chinas foreign economic and trade development and international payment requirements, but also in line with the international trend of diversification of the currency structure of foreign exchange reserves, which helps to reduce the exchange rate risk of Chinas foreign exchange reserves.

Looking ahead, the overall stability of Chinas foreign exchange reserves remains to be supported. Since this year, under the background of the complex international situation, Chinas economic operation has been generally stable, stable and progressive, the main economic indicators are in a reasonable range, the economic structure has been continuously optimized, and the positive factors for high-quality development have increased. With this support, Chinas foreign exchange market is running smoothly. The small fluctuation of foreign exchange reserve scale is mainly affected by valuation factors, and the overall scale remains stable.

Source: Guo Chenqi_NBJ9931, Responsible Editor of China Foundation Newspaper