Keep going up! RMB continues to appreciate against US dollar
On October 21, the RMB exchange rate reached a new high in both the offshore and onshore markets. As of the time of publication, the onshore RMB / USD reached a maximum of 6.6413 and the offshore RMB / USD hit 6.6237, a new high since July 2018.
Since the beginning of June, the RMB exchange rate has continued to strengthen. The offshore RMB exchange rate against the US dollar gradually rose from 7.1964 to 6.6237, rebounding more than 5700 points. A simple calculation, if a resident exchange 100000 US dollars, need 719000 yuan, to todays minimum is only 662000 yuan, the difference is more than 57000 yuan.
Ignoring the regulation of the central mother
Previously, because the RMB exchange rate rose too fiercely, the central bank had to move. On October 10, the central bank announced that since this year, the RMB exchange rate has fluctuated in two directions based on market supply and demand, with enhanced flexibility, stable market expectations, orderly cross-border capital flow, stable operation of the foreign exchange market, and balanced market supply and demand.
Therefore, the peoples Bank of China has decided to reduce the foreign exchange risk reserve ratio of forward foreign exchange sales business from 20% to 0 from October 12, 2020.
In the long run, the RMB exchange rate may not strengthen excessively
In the long run, on the one hand, if the U.S. economy gradually recovers, the RMB exchange rate will still bear certain pressure. On the other hand, from the perspective of double cycle, the current account and capital account still need to maintain overall balance. If RMB is excessively strong, it may bring pressure on current account to a certain extent. Therefore, in the long run, RMB exchange rate may not be excessively strong.
In addition, Xie Yaxuan, an analyst of China Merchants Securities, believes that the current appreciation is different from the gradual appreciation in 2005-2014. At that time, due to the purchase and sale of foreign exchange by the central bank in the foreign exchange market, the RMB exchange rate fluctuated slightly, showing a clear and stable appreciation trend. However, due to the central banks withdrawal from the normal intervention on the market through foreign exchange funds, the volatility of RMB exchange rate has increased significantly. On the one hand, in order to improve the market-oriented formation mechanism of exchange rate, on the other hand, in response to the pressure from the United States, it is expected that the central bank is unlikely to restart its direct intervention in the market. At present, the rapid appreciation of RMB is not only one aspect of increasing volatility, but also means that there may be a short-term rapid depreciation stage in the future.
Source: Ren Hui, editor in charge of China Fund News_ NBJ9607