USD/RMB Quotes Analysis
On the 11th, the central parity of the yuan against the US dollar was lowered by 61 basis points, and the market exchange rate was slightly higher. Market participants pointed out that the Fed’s interest rates are approaching, and the US dollar is mainly consolidating. Waiting for policy signals, the renminbi will continue to fluctuate in the short term against the US dollar. Looking back, the risk of RMB depreciation against the US dollar is still small during the year.
A slight shock rises
On the 11th, the exchange rate of the renminbi against the US dollar was set at 6.4064 yuan, down 61 basis points from the previous value. In the inter-bank foreign exchange market, the spot exchange rate for Renminbi against the US dollar edged higher after opening slightly higher. The daily trading fluctuated little, up to 6.400 yuan, with a minimum of 6.4089 yuan, and the closing price at 16:30 was reported at 6.41616 yuan. The previous closing price rose 81 basis points.
In the course of this wave of dollar rally in the past, the RMB exchange rate against the US dollar also depreciated by a certain margin. According to statistics, from April 20 to May 30, the exchange rate of the yuan against the US dollar depreciated by 1,375 basis points, a margin of 2.19%; the spot exchange rate of the yuan against the US dollar depreciated by 1470 basis points, a margin of 2.34%.
However, compared with the increase of the U.S. dollar index (93.5753, 0.0366, 0.04%) and the depreciation of other emerging market currencies, the performance of the renminbi exchange rate remains relatively stable. Statistics show that the US dollar index rose from 95.5% in mid-April to 95.04, with the largest increase exceeding 6%. Affected by the rapid appreciation of the U.S. dollar, most emerging market currencies have depreciated against the U.S. dollar since April, and some have fallen by more than 8 percent, such as the Argentine peso, the Mexican peso, and the Brazilian real.
In addition, the RMB exchange rate index, which reflects the exchange rate of the RMB against a basket of currencies, has remained basically stable. According to the announcement of the foreign exchange trading center, as of June 8, the CFETS Renminbi exchange rate index stood at 97.3, still slightly higher than that of 96.97 on April 13.
There is little risk of devaluation during the year
As the U.S. dollar index fell back from the 95th line, since June, the exchange rate of the renminbi against the U.S. dollar has shown more turbulence. Analysts believe that if the US dollar continues to rise, the renminbi will remain under pressure against the US dollar to a certain extent. In addition, the possibility of a narrowing trade surplus on the trend of the RMB exchange rate is also worthy of attention, but for now, the RMB against the US dollar during the year The risk of devaluation is still limited.
On the one hand, the uncertainty of the US dollar index itself has increased. Many market institutions defined the rebound in the US dollar from late April to the end of May as a fix for the recovery of the sharp fall in the US dollar index in 2017.
In 2017, the fundamentals of the U.S. dollar continued to improve. The U.S. economy maintained rapid growth and the employment market remained tight. In the major central banks, the normalization of the U.S. monetary policy remained at the forefront, but the market paid more attention to economic recovery and currency in Europe and Japan. The possibility of policy reversion to normalization pushed up the exchange rate of the euro (1.1789, -0.0004, -0.03%), and at the same time caused the dollar index to continue to fall. Since the beginning of this year, the global economic recovery has been slowing down, and the European economy has seen repeated performance. This has led the market to re-examine the leading role of the US dollar in economic growth and monetary policy cycles. In addition, inflation and supply expectations have pushed up U.S. debt interest rates and expanded the US dollar. The relative spread, the dollar began a repair journey.
However, people in the industry believe that the US dollar has risen to the 95 level, and the repair has basically come to an end. Follow-up rises require new reasons, either the Fed's pace of raising interest rates or the weakness of the euro and other U.S. dollar index currencies. The current market's views on the future trend of the US dollar are very different, and the uncertainty of the future trend of the US dollar is not small.
On the other hand, the RMB exchange rate still has a relatively strong support. First, the economic growth is more resilient, and the possibility of a rapid economic slowdown is very small. Second, in the devaluation environment of the past few years, Chinese companies have accumulated a large number of dollar positions, and the release of foreign exchange demands is expected to form a certain support for the RMB exchange rate; The continued expansion of the domestic equity and debt markets is attracting foreign capital; in the end, under the de-levering environment, the RMB interest rate is still not low, which can provide some support for the exchange rate.
Of course, under the situation of increasing trade frictions and expanding imports, China’s trade surplus is facing a certain degree of narrowing pressure, which may have an adverse effect on the long-term trend of the RMB exchange rate. It is more difficult for the renminbi to appreciate significantly, but there is a sharp devaluation. The risk is still small.
Market participants believe that the Fed’s interest rate is coming soon, and the US dollar is expected to concentrate in the short-term, and the RMB exchange rate against the US dollar may fluctuate slightly with the US dollar.