Abstract The major central banks represented by the European Central Bank have successively launched the "deflation and defense war", and the US economy has become the only one to strengthen the strong position of the US dollar. The depreciation pressure of RMB in 2015 should not be underestimated. Following the 23rd, the RMB spot exchange rate plummeted 22...
The major central banks represented by the European Central Bank have successively launched the "deflation and defense war", and the US economy has become the only one to strengthen the strong position of the US dollar. The depreciation pressure of RMB in 2015 should not be underestimated. After the spot exchange rate of the RMB fell by 222 basis points on the 23rd, the spot exchange rate of the RMB against the US dollar closed at 6.2542 on the 26th, and continued to depreciate sharply by 254 basis points, a new low in June 2014. The lowest intraday price fell to 6.2569, which was close to the median price of 2%.
The US dollar index has strengthened in the past two months, and the renminbi has fallen. This has led to an increase in the willingness of residents and businesses to hold US dollars, and the purchase of US dollars has increased. In December 2014, foreign exchange holdings dropped significantly.
Has the RMB entered the depreciation channel? In the case of the global depreciation of non-US dollar currencies, should the RMB depreciate actively to seek self-insurance?
“The market will definitely pay close attention to the median price given by the central bank today (January 27). If the central bank cuts the middle price again, it will let the market think that the central bank intends to depreciate the yuan. This will increase the capital outflow pressure and cause further depreciation of the renminbi. The vicious circle is not what the central bank wants to see.†Liu Dongliang, an analyst at the Financial Markets Department of China Merchants Bank, analyzed the “First Financial Dailyâ€.
In Liu Dongliang's view, the central bank is expected to choose to maintain stability or raise the median price because the current RMB depreciation condition is not mature.
Approaching the down limit
On January 26, the spot exchange rate of the RMB against the US dollar was 6.2542, which continued the downward trend of the previous trading day (January 23) and set the biggest two-day decline since December 2008.
In addition, the decline in the spot exchange rate of the RMB against the US dollar has approached the maximum volatility of the central price by 2%, with the largest decline reaching 1.95%, setting a new record.
According to the regulations of the central bank, since March 17, 2014, the fluctuation of the RMB-to-US dollar trading price in the inter-bank spot foreign exchange market has expanded from 1% to 2%.
According to data released by the China Foreign Exchange Trading Center yesterday, the central parity of the RMB against the US dollar was reported at 6.1384, down by 42 basis points from the previous trading day (January 23) of 6.1342.
It is worth noting that on January 23, the People's Bank of China [microblogging] has significantly lowered the central parity of the RMB against the US dollar by 95 basis points, from 6.1247 to 6.1342, and fell 137 basis points in two consecutive trading days, creating 2014. The lowest level since December 5.
Will the central bank “maintain stability�
Market analysts believe that the change in the middle price can largely reflect the central bank's attitude toward the RMB exchange rate. The central bank lowered the central parity of the yuan against the US dollar for two consecutive working days, meaning that the central bank intends to expand the decline of the yuan.
Xie Yaxuan, director of macro research at China Merchants Securities, told this reporter that the adjustment of the central parity of the renminbi against the US dollar has released a clear signal that the central parity of the renminbi is an objective manifestation of a basket of currencies. The divergence of policies in Europe and the United States has led to a stronger dollar and a weaker euro. Next, the situation of a basket of currencies corresponding to the renminbi has also changed, which is a more market-oriented performance of the middle price.
In addition, Xie Yaxuan and other industry insiders told this reporter that the central bank did not see the intervention in the market yesterday.
There are also media reports that a joint-stock bank trader said that he did not see an obvious Chinese bank settlement to suppress the dollar price. After the sharp fall of the renminbi, the exchange rate increased, and the pressure on the devaluation of the renminbi was held, so that the renminbi continued to fluctuate above 6.2500.
Market analysts say the Chinese central bank has been "acquiring" for the depreciation of the yuan in recent months. Yesterday, the renminbi approached the US dollar against the US dollar. The central bank did not intervene. In addition, the central parity price was cut sharply for two consecutive working days. Does this mean that the central bank intends to “green light†the devaluation of the renminbi? Market participants generally believe that it remains to be seen.
“Since the European Central Bank launched QE (Quantitative Easing Policy) last week, the pressure of RMB depreciation has begun to brew. On the 26th, the People’s Bank of China continued to cut the median price, so that the accumulated depreciation pressure finds catharsis, but this does not mean that the RMB will continue to be large. Depreciation, the key is to look at the attitude of the central bank." Liu Dongliang said that considering that China's current trade surplus is too large, the central bank is not expected to easily let the yuan depreciate sharply.
The timing of devaluation is not yet mature
On January 23, Pan Gongsheng, deputy governor of the People's Bank of China, said that the European Central Bank's QE and the normalization of the US quantitative easing policy will further push the US dollar exchange rate, which may put downward pressure on the RMB against the US dollar.
Despite the recent depreciation of the RMB against the US dollar, it should not be overlooked that the RMB is still relatively strong in non-US currencies, and the real effective exchange rate of the RMB has continued to appreciate. Analysts pointed out that the fact that the real effective exchange rate of the renminbi is too strong will not be conducive to the domestic economic recovery.
Lu Zhengwei, chief economist of Industrial Bank, expects the maximum depreciation of the RMB exchange rate to reach about 5% this year. He believes that the current effective exchange rate of the renminbi is not balanced, but is continuously overvalued.
Is the timing of RMB depreciation mature? The answer given by many economists is no.
Liu Dongliang analyzed this reporter's analysis that the main reason for the current devaluation of the renminbi is that China's trade surplus is too large. In November last year, the trade surplus hit a historical record, and the surplus in December was the third highest in history. Under this circumstance, If the renminbi depreciates again, it will be a bit unreasonable.
Xie Yaxuan’s biggest concern about the depreciation of the renminbi is that the market will form an expectation of a continued depreciation of the renminbi and reduce the market demand for renminbi.
Feasibility Study on Decoupling the US Dollar
How to minimize the impact of the appreciation of the dollar on the renminbi?
The decoupling of the renminbi from the US dollar seems to be gradually becoming a consensus in the industry. Guan Qingyou, vice president of Minsheng Securities Research Institute, said that this round of US recovery is accompanied by trade rebalancing and will not directly drive China's exports. On the contrary, as the renminbi pegs to the US dollar, the real effective exchange rate of the renminbi will accelerate along with the US dollar index, which will put more pressure on exports, which will prompt domestic adoption of more endogenous micro-stimulus measures and force domestic reforms.
Wu Qing, a researcher at the Financial Research Institute of the Development Research Center of the State Council, said in an interview with the media that the central bank is working hard to further expand the range of exchange rate fluctuations. The decoupling of the renminbi from the US dollar needs to go through two intermediate states. First, the central bank reduces intervention and expands the range of exchange rate fluctuations. The central bank tries not to intervene as much as possible, but does not promise to stop intervening and can resume intervention at any time.
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