Figure 1 annual increase of RMB against USD (left) Figure 2 annual increase of RMB exchange rate index (right) data source: wind
Figure 3 change of onshore RMB to USD (left) Figure 4 change of offshore RMB to USD (right) data source: wind
Two variables that affect the exchange rate: the current account determines the direction, and the capital and financial account determine the volatility
When the exchange rate mechanism is finalized and the exchange rate has been in a reasonable equilibrium level, the focus of exchange rate itself naturally turns to the release of functions. This is what President Yi Gang pointed out in the article adhering to the goal of currency stability and implementing a sound monetary policy. Under the economic globalization and open macroeconomic pattern, the flexible exchange rate mechanism is to respond to external shocks and achieve internal and external equilibrium s stabilizer. That is to say, the performance of RMB exchange rate is endogenous to the change of economic operation. The change here includes the trend of exchange rate and the fluctuation of exchange rate. Therefore, how to judge these two changes is the key to exchange rate forecast in the future.
Figure 5 change of current account balance (left) Figure 6 change of capital and financial account balance (right) data source: wind
According to the international standard, the current account balance of a countrys balance of payments is stable at [- 2%, 2%] of GDP, and the countrys balance of payments is balanced. The proportion of Chinas current account balance to GDP was 5.79% when the exchange rate was changed in 2005, and the highest value was 9.95% in 2007. After that, it fell back year by year to less than 4% in 2010, to less than 2% in 2013, and only 0.36% in 2018. In terms of the structural change of current account, i.e. the import and export of goods and services, after 2013, Chinas goods export surplus decreased slowly, but the service deficit expanded rapidly, and the corresponding US dollar flowing into China from the current account will show a downward trend.
If we want to reverse this trend, it depends on the earning capacity of Chinas high-end manufacturing industry and service industry. However, at present, China is in the stage of upgrading to high-quality manufacturing industry. At the same time, with the per capita GDP entering the stage of million US dollars, the overseas consumption of residents including tourism and education will continue to increase. Therefore, in the short term, we cant reverse the downward trend of current account surplus and the corresponding change of current account balance The trend of RMB exchange rate is determined by the situation of RMB conversion.
Corresponding to the decline of current account surplus, the fluctuation amplitude of Chinas capital and financial account balance has increased significantly. In addition, the acceleration of Chinas opening-up process and further expansion of its scope will inevitably lead to the increase of frequency and scale of cross-border capital flows, which will have an impact on the RMB exchange rate. That is to say, the fluctuation of RMB exchange rate is determined by the change of capital and financial account balance Amplitude.
The above two variables will determine the long-term trend of RMB exchange rate.
In addition, the short-term factors for looking forward to the trend of RMB exchange rate in 2020 include the following five points:
2. The growth rate of Chinas GDP in the fourth quarter of last year was 1.5% on a month on month basis, 0.1% higher than that in the third quarter. Chinas economic bottoming and stabilization;
3. The Federal Reserve has suspended the pace of interest rate reduction, but has restarted the expansion of the balance sheet. At the same time, Chinas monetary policy has maintained a stable direction, but it focuses more on flexibility and moderation, including the differences in the monetary and financial environment between China and the United States, including the interest rate gap between China and the United States;
4. The markets response to data changes such as foreign exchange and gold reserves, foreign debt, import and export, and the size of US debt held, i.e. the markets assessment of the central banks ability to maintain exchange rate stability;
5. Foreign trade departments own prediction and response to the trend of RMB exchange rate.
Figure 72020 simulation data source of RMB exchange rate trend: wind
The above five short-term factors will ultimately affect market sentiment, and then reflect on the trend of RMB short-term exchange rate. Referring to the actual trend of RMB exchange rate from 2016 to 2019, the simulated trend of RMB exchange rate in 2020 is combined with the above long-term and short-term factors of RMB exchange rate, and it is expected that the RMB exchange rate in 2020 will expand compared with last year (RMB exchange rate in 2019 The rate is the lowest since 2016), and the annual fluctuation range [6.6, 7.2]. Source: surging news editor: Yang Bin Gu nf4368
The above five short-term factors will ultimately affect market sentiment, and then reflect on the trend of RMB short-term exchange rate. Referring to the actual trend of RMB exchange rate from 2016 to 2019, the simulated trend of RMB exchange rate in 2020 is combined with the above long-term and short-term factors of RMB exchange rate, and it is expected that the RMB exchange rate in 2020 will expand compared with last year (RMB exchange rate in 2019 The rate is the lowest since 2016), and the annual fluctuation range [6.6, 7.2].