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The exchange rate of RMB against the US dollar regained the 7.10 mark!

After the offshore renminbi rose 1,075 points against the US dollar on November 29, as of 22:50 on November 30, the renminbi rose by more than 500 points and regained the 7.10 mark again.


On December 1, the RMB continued to rise against the US dollar. As of 11 am, the onshore RMB was quoted at 7.0663 against the US dollar, and the offshore RMB was quoted at 7.0636 against the US dollar.


According to the foreign exchange trading center, on December 1, the central parity rate of RMB against the US dollar in the inter-bank foreign exchange market was quoted at 7.1225 yuan, an increase of 544 basis points from the previous value.


From the perspective of the U.S. dollar index, the U.S. dollar index rose slightly on November 29, and the RMB strengthened sharply away from the U.S. dollar index; as of 22:50 on November 30, the U.S. dollar index fell 0.32%, and the RMB rose about 0.7% against the U.S. dollar.


Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, said that the RMB exchange rate has rebounded recently. On the one hand, the country continues to optimize epidemic prevention measures and actively promote precise and efficient implementation. Policies such as stabilizing the property market continue to make efforts, and the market is more optimistic about the prospects for economic recovery; The recent weakening of the U.S. dollar has driven the rebound of non-U.S. currencies such as the renminbi, and the recovery of market risk sentiment has driven capital inflows into renminbi assets.

The exchange rate of RMB against the US dollar has continued to rise sharply

On November 30, the offshore RMB rose sharply against the US dollar, rising nearly 500 points in a single day as of 22:50. On November 29, the day before, the offshore renminbi against the U.S. dollar also rose by more than 1,000 points, and the current exchange rate of the renminbi against the U.S. dollar regained 7.10 again.


As of 21:00 on November 30, the onshore RMB against the US dollar also rose above 7.10, with a quotation of 7.0700, a single-day increase of more than 800 basis points. As of 11:00 on December 1, both onshore and offshore RMB fluctuated around 7.06 against the US dollar.


In terms of news, recently, policies to support domestic economic development have been frequently issued. On November 25, the central bank announced that it would cut the reserve ratio by 0.25 percentage points on December 5, releasing about 500 billion yuan of long-term funds.


Regarding the purpose of this RRR cut, the relevant person in charge of the central bank stated that, first, to maintain a reasonable and sufficient liquidity, maintain a reasonable growth in the total amount of money and credit, implement a package of policy measures to stabilize the economy, increase support for the real economy, and support the quality of the economy. Effective promotion and reasonable increase in volume. The second is to optimize the capital structure of financial institutions, increase the long-term stable funding sources of financial institutions, enhance the capital allocation capabilities of financial institutions, and support industries and small, medium and micro enterprises that have been severely affected by the epidemic. The third is that the RRR cut reduces the capital cost of financial institutions by about 5.6 billion yuan per year, which can promote the reduction of the comprehensive financing cost of the real economy through the transmission of financial institutions.


Immediately afterwards, on the evening of November 28, the China Securities Regulatory Commission announced five measures to adjust and optimize equity financing to support the stable and healthy development of the real estate market, which was interpreted by the industry as the “third arrow” to support the financing of real estate companies.

my country’s foreign exchange market continues to strengthen its resilience and maintain stable operation

It is worth noting that since late September, the fluctuation of the exchange rate of RMB against the US dollar has increased significantly.


Wang Qing, Chief Macro Analyst of Orient Jincheng, previously said that against the background of the Fed’s continuous and rapid interest rate hikes and the increasing downside risks of the global economy, the current mood in the global capital market fluctuates violently and is prone to ups and downs.


Wang Qing pointed out that “the recent violent fluctuations also indicate that the momentum of the dollar’s rapid unilateral rise after August has weakened, and the global foreign exchange market is turning into a state of horizontal and wide fluctuations. As far as the RMB exchange rate is concerned, the current domestic economy generally remains stable. With the momentum of upward recovery, my country’s current account will continue to maintain a large-scale surplus, and the fundamentals do not support the rapid depreciation of the renminbi independently of the US dollar.”


At present, the market plays a decisive role in the formation of the RMB exchange rate. The two-way fluctuation of the RMB exchange rate has increased its flexibility, and it has played the role of an automatic stabilizer for the macro economy and the balance of payments.


“China’s foreign exchange market has shown new characteristics, and its resilience has continued to increase.” Pan Gongsheng, deputy governor of the People’s Bank of China and director of the State Administration of Foreign Exchange, said at the 2022 Financial Street Forum Annual Meeting on November 21. Compared with the previous two periods of dollar appreciation, 2021 Since then, the sensitivity of the RMB exchange rate to fluctuations in the U.S. dollar index has decreased. From a global perspective, compared with major developed and emerging market currencies, the depreciation of the RMB is at an average level. Although there were fluctuations in cross-border capital flows, they were generally stable and orderly.


In addition, Pan Gongsheng pointed out that looking forward, China’s foreign exchange market will maintain a stable operation. On the one hand, the risk of economic recession in major developed countries is rising, inflation is still higher than the policy target, monetary policy will generally remain tight, and the US dollar may remain high and volatile in the short term. Market institutions predict that the momentum of US dollar appreciation will weaken, and the strong appreciation cycle may be coming to an end. On the other hand, the long-term sound fundamentals of China’s economy will not change.

Expert: return to exchange rate neutrality, focus on main business

At present, there are still many uncertainties in the foreign exchange market. As for the Federal Reserve, last Wednesday, the Federal Reserve released the minutes of its November meeting, showing that slowing down interest rate hikes has become the mainstream view within the Fed, and for the first time pointed out that the probability of a U.S. economic recession next year is around 50%, which makes the market more concerned about the U.S. economic recession and long-term interest rate cuts expected enhancement.


However, this week, several Fed officials once again released “hawkish” signals. New York Federal Reserve Bank President John Williams said in a speech in New York that day that there are signs that inflation is easing, but the Fed has “more work to do” to bring inflation closer to its 2% target .


On the same day, St. Louis Fed President James Bullard said financial markets had underestimated the Fed’s determination to take more aggressive measures in response to the worst inflation in 40 years. The Fed may have to keep interest rates above 5% next year and possibly into 2024, he said.


It is reported that on November 2, the Federal Reserve just announced that it will raise the target range of the federal funds rate by 75 basis points to 3.75% to 4%.


Wang Qing previously said that against the background of the Fed’s continuous and rapid rate hikes and the increasing downside risks of the global economy, the current mood in the global capital market fluctuates violently and is prone to ups and downs.


According to statistics, since the end of October, the offshore RMB has risen by more than 1,000 points in a single day for many times. For example, on October 26, the offshore RMB rose by 1,264 points against the US dollar; 1541 points; on November 10, the offshore RMB rose by 1192 points against the US dollar; on November 29, the offshore RMB rose by 1075 points against the US dollar.


“Recently, the global foreign exchange market has fluctuated greatly. Judging from the trend, there are still many uncertain factors in the world, and the foreign exchange market has certain fluctuations and fluctuations.” Zhou Maohua said that in this environment, the market bets on the unilateral trend of the exchange rate, which is risky. The rational choice of enterprises is to return to exchange rate neutrality, focus on the main business, make good use of foreign exchange derivatives to manage risks, gradually increase the cross-border use of RMB in the field of foreign trade, and effectively avoid the risk of exchange rate fluctuations.

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