Since the end of May, the RMB has been appreciating against the US dollar. After reaching a low of 7.1316 on May 29, the RMB continued to appreciate to the recent 6.5484, and the cumulative appreciation rate in the past six months has exceeded 8%. This round of RMB appreciation, which lasted for nearly half a year, is relatively rare since the 8.11 exchange rate reform in 2015.
At the end of the year, all parties in the market still pay close attention to the trend of exchange rate in the coming year. On November 25, Goldman Sachs said in a media conference call that it was very optimistic about the future RMB exchange rate. Specifically, Goldman Sachs is not optimistic about the U.S. dollar in 2021. Recently, Goldman Sachs told its clients that it expects the dollar index to continue to depreciate by 6% in 2021, given that the dollar is still overvalued..
Shan Hui, chief China economist at Goldman Sachs, said that the US dollar depreciated and the RMB appreciated against the US dollar even if it was flat against other currencies. Flash forecast that 12 months later, the exchange rate of RMB against the US dollar will be 6.30, which is less than 6.60 now, and there is still some room for appreciation.
Flash analysis said that, first of all, the economy is basically supported by the RMB. Second, interest rates are higher in China than in other economies, and China remains attractive to foreign investors. Some international indexes include Chinese bonds, which will also attract foreign investment. Third, the Central Bank of China is committed to promoting interest rate liberalization. Under these factors, the RMB exchange rate against the US dollar will reach 6.30 in 12 months.
Various institutions have similar views on why the RMB has appreciated, including the rapid recovery of Chinas economy after being affected by the epidemic and other negative effects, the RMB exchange rate promoted by the weakening US dollar, and Chinas continuous expansion of territory in the free trade market, etc., all have an impact on the appreciation of RMB.
Guotai Junans fixed income research shows that the appreciation of RMB has experienced a process from passive appreciation to active appreciation, from partial appreciation to comprehensive appreciation. Specifically, from June to July, the appreciation of RMB against the US dollar was mainly contributed by external factors, while internal factors began to form positive contributions to the exchange rate and began to dominate the pricing of RMB since August; the appreciation of RMB against the US dollar from June to July was only partial appreciation, but it was still depreciating for other currencies (Euro, Australian dollar, British pound, Korean won and Japanese yen), and since August, RMB against one The basket currency began to appreciate comprehensively.
Huatai Securities believes that there are some short-term catalysts behind the rapid appreciation of RMB in the near future. Specifically, the reasons include: Chinas economy restarted earlier, the growth gap between home and abroad widened; the US dollar weakened; Chinas current account surplus increased; the expected warming of Sino US trade friction; and the previously suppressed demand for foreign exchange settlement was released.
Galaxy Futures Research Institute also believes that there are four main reasons. First, China first controlled the epidemic, which led to a substantial increase in Chinas exports. In addition, overseas tourism stagnated, resulting in a relatively large surplus in Chinas current account; second, the weakening of the US dollar, and the adjustment of the middle price after the index fluctuation; third, Chinas recent accession to the RCEP The worlds largest free trade zone, the market is expected to greatly enhance the scale of Chinas foreign trade. Finally, under the managed two-way floating system, the RMB appreciation in the near future will seek a new two-way fluctuation upper limit, reflecting the characteristics of marketization.
However, Huatai Securities has also made an in-depth analysis of the fundamental factors behind the RMB appreciation cycle. On the one hand, the improvement of relative production efficiency of enterprise sector supports the appreciation of real exchange rate. For example, since 2017, the overall efficiency of Chinas tradable sector, that is, the manufacturing industry, has been greatly improved. The trade friction between China and the United States started in 2018 led to the deterioration of Chinas terms of trade, which delayed the time point of exchange rate strengthening. In addition, the efficiency improvement of Chinas service industry has been more rapid in recent years. On the other hand, the relative marginal return on investment of Chinas financial assets and real economy may be stronger than that of Europe and the United States in the next few years.
As for the appreciation of RMB, the central bank has recently set up a column in the third quarter of 2020 Chinas monetary policy implementation report for analysis. The central bank said that the recent appreciation of the RMB is mainly a good reflection of Chinas economic fundamentals. China took the lead in controlling the epidemic situation, taking the lead in resuming work and production and recovering positive economic growth. Exports grew rapidly, and foreign entities continued to increase their holdings of RMB assets. On the whole, the RMB is still two-way floating.
According to the data disclosed by the central bank, the current two-way floating of RMB exchange rate is mainly reflected in the third quarter from 2019 to 2020. Among the 427 trading days, 216 trading days have appreciated and 211 trading days have devalued.
In addition, according to the calculation of the bank for International Settlements, by the end of September, the nominal and real effective exchange rate of RMB had increased by 2.67% and 2.19% respectively compared with that at the end of last year; since the reform of the RMB exchange rate formation mechanism in 2005 and the end of September 2020, the nominal and real effective exchange rate of RMB increased by 35.85% and 49.66% respectively. In the first three quarters, the exchange rate elasticity of RMB against the US dollar has been enhanced, with a slight appreciation.
In the third quarter, the highest middle rate of RMB against US dollar was 6.7591 yuan, and the lowest was 7.0710 yuan. Among 66 trading days, 42 trading days appreciated and 24 trading days devalued. The maximum one-day appreciation rate was 0.59% (397 points), and the maximum one-day depreciation rate was 0.41% (277 points).
The central bank mentioned in the report that the RMB exchange rate formation mechanism has been continuously reformed in the direction of more and more marketization. Since then, the exchange rate reform will continue to adhere to the direction of marketization, optimize the allocation of financial resources, enhance the flexibility of exchange rate, pay attention to the guidance of expectations, and realize the basic stability of RMB exchange rate at a reasonable equilibrium level under the framework of general equilibrium. It includes: first, adhere to the managed floating exchange rate system based on market supply and demand, refer to a basket of currencies for adjustment, continue to insist on allowing market supply and demand to determine the exchange rate level, and do not conduct normal intervention in the foreign exchange market. Second, we should continue to enhance the flexibility of the RMB exchange rate and give better play to the role of the exchange rate in regulating the macro-economy and the automatic stabilizer of the balance of payments. The third is to strengthen the management of foreign exchange market, give full play to the role of self-discipline mechanism of foreign exchange market, strengthen the authenticity audit of foreign exchange derivatives transactions of enterprises, and prevent the credit risk of financial institutions caused by some enterprises deviating from actual needs, increasing leverage, speculation and arbitrage. Fourth, we should grasp the balance of internal and external equilibrium, and realize the basic stability of RMB exchange rate at a reasonable equilibrium level under the framework of general equilibrium. The formulation and implementation of monetary policy must be based on ourselves. The market-oriented exchange rate helps to improve the autonomy of monetary policy and promote the balance of internal and external economic equilibrium. Source of this article: Zhong Qiming, editor in charge of securities companies in China_ NF5619
The central bank mentioned in the report that the RMB exchange rate formation mechanism has been continuously reformed in the direction of more and more marketization. Since then, the exchange rate reform will continue to adhere to the direction of marketization, optimize the allocation of financial resources, enhance the flexibility of exchange rate, pay attention to the guidance of expectations, and realize the basic stability of RMB exchange rate at a reasonable equilibrium level under the framework of general equilibrium. It includes: