The dollar dived last night! RMB exchange rate may not weaken significantly in the future

 The dollar dived last night! RMB exchange rate may not weaken significantly in the future

The European Central Bank announced that the dollar fell more than 5500 points in one hour

In less than an hour, the U.S. dollar plunged more than 5500 points.

According to the data, at around 22:13 p.m. Beijing time last night, the U.S. dollar index fell all the way from 97.1584. In less than an hour to around 23.07, the dollar index fell 5535 basis points to 96.6049, below the 97 mark. It then fell slightly to 96.5774, the lowest level since March 13 this year. Although the dollar index rose slightly in late trading, it did not break the 97 mark.

The European Central Bank yesterday announced that it would keep current interest rates unchanged, but expand the scale of the popular emergency purchase plan (PEPP) from 750 billion euros to 1.35 trillion euros, higher than the expected 500 billion euros expansion. The ECB will also extend the plan to at least June 2021, and said it will continue to invest the benefits of the plan in the project until the end of 2022 or later.

Tempus, the US foreign exchange trading platform, said on Thursday that the US dollar exchange rate was relatively calm overnight, but the European Central Banks decision to expand bond purchases boosted market sentiment and reduced the demand for safe haven currencies, and the US dollar came under pressure again.

Zhao Qingming also believes that the overall strength of the dollar since this year is due to the fact that for most investors around the world, the dollar is still the main safe haven currency. But over time, the impact of the epidemic on the global economy has become more and more clear. The return to work in Europe is better than that in Europe, which has also led to the strength of many non US currencies.

RMB is now appreciating slightly, and its hard to go against the trend when the US dollar weakens

With the weakening of the US dollar, the exchange rate of RMB also appreciated slightly today. According to the data, todays central parity rate of RMB is 7.0965, up 47 basis points from the previous trading day. After opening, although the onshore RMB exchange rate appreciated at the beginning of opening, there was a slight depreciation again. The lowest depreciation was 7.1145, 79 basis points lower than yesterdays closing price.

In fact, the RMB exchange rate has been relatively weak in recent two weeks. Market expectations are also relatively negative. However, some people in the industry believe that the RMB exchange rate is difficult to significantly weaken against the trend when the dollar is generally weak.

The trend of the RMB exchange rate will be affected by the international trend, and the depreciation of the RMB exchange rate will not be too large under the circumstances of the overall weakening of the US dollar and the continuous strengthening of non US currencies. Zhao Qingming believes that, however, some measures taken by the United States against Huawei and other Chinese enterprises have worried the international market, and the expectation of the foreign exchange market has therefore turned pessimistic. However, in terms of the domestic market, Chinas epidemic situation has been effectively controlled, and the view that there is no devaluation basis for the RMB has once again become universal.

Wang quanyue, an investment consulting analyst at CCB, said that in the short term, China still has sufficient foreign exchange reserves. Under the effect of counter cyclical adjustment factors, there is sufficient policy space to maintain the short-term basic stability of the exchange rate. As long as the balance of payments can maintain the basic balance, the possibility of one-way and large fluctuations in the exchange rate is very small. In the long run, the change of exchange rate mainly reflects the fundamentals of a country. At present, the fundamentals of Chinas long-term economic growth have not changed. The increase of exchange rate volatility is only the normal market reaction under the background of the gradual formation of exchange rate marketization mechanism.

In fact, many overseas institutions have begun to pay attention to and increase the allocation of Chinese assets. In early May, the regulations on the management of domestic securities and futures investment funds of overseas institutional investors began to play a positive role, and a new round of RMB bond buying by overseas institutions was launched.

Source: Financial Association editor in charge: Chen Hequn_ NB12679