The RMB exchange rate broke 7!

Nearly five months later, the RMB/US dollar exchange rate again reached the “7” mark. On the morning of May 17, the exchange rate of offshore RMB against the US dollar fell below “7”, and the offshore RMB has fallen nearly 1,000 points in the past 7 trading days.

 

In recent years, China’s foreign exchange surplus is relatively large, but the US dollar interest rate remains high, which has a certain impact on foreign trade enterprises’ foreign exchange settlement behavior, leading to the differentiation of foreign trade surplus and bank exchange settlement, affecting short-term market supply and demand.

On May 17, the offshore yuan against the US dollar fell below the “7” mark in intraday, since May 9 offshore yuan against the US dollar from the closing price of 6.9244 on that day to the current close of 7, has adjusted more than 700 basis points.

The main reasons for the short-term depreciation of RMB are as follows:
First, the domestic settlement rate is generally low, and the selling rate is high;
Second, there are setbacks in domestic economic repair.
Third, the Fed indicated that the rate cut is less likely this year, leading to a rebound in the dollar index.

However, experts point out that under the prospect of overseas economic downturn and domestic economic recovery this year, although the trend of RMB “breaking 7” in the short term may continue for a while, but under the prospect of overseas economic downturn and domestic economic recovery this year, there is no large depreciation space for RMB.

RMB exchange rate breaks “7” for the first time this year

On the 17th, the offshore RMB against the US dollar fell below “7”, as of the press at 7.0106. It is the first time since December 29 last year that the exchange rate of the yuan against the dollar has broken 7.

 

In the onshore market, the renminbi also fell, trading close to the “7” mark against the dollar, with the mid-price weaker by 242 basis points to 6.9748.

In view of the devaluation of the renminbi, Orient Jincheng chief macro analyst Wang Qing pointed out that the impact of many factors. First, the US Federal Reserve said it would most likely not cut interest rates this year, which led to a rally in the dollar index, which in turn caused the renminbi to depreciate against the dollar. Secondly, since the beginning of the year, the domestic settlement exchange rate is generally low and the selling exchange rate is relatively high, so the large trade surplus is more converted into domestic US dollar deposits instead of being converted into RMB, which has an impact on the balance of supply and demand in the foreign exchange market and also promotes the depreciation of RMB against the US dollar.

 

In addition, Wang stressed that recent macro data indicating a bumpy patch in the domestic economic repair could also have an impact on currency market sentiment.

The RMB exchange rate fluctuates in both directions and becomes more flexible

This year, domestic exports are relatively strong. China’s total import and export value increased by 5.8% year-on-year to 13.32 trillion yuan in the first four months of this year, data released by the General Administration of Customs showed on Tuesday. Of which, the export was 7.67 trillion yuan, up by 10.6%; Imports reached 5.65 trillion yuan, up 0.02%; Trade surplus increased by 56.7% to 2.02 trillion yuan.

 

In April, China’s imports and exports reached 3.43 trillion yuan, up 8.9%. Of which, the export was 2.02 trillion yuan, up by 16.8%; Imports were 1.41 trillion yuan, down 0.8%; Trade surplus reached 618.44 billion yuan, up 96.5%.

 

The balance of payments market has a solid foundation, which is the basic plate for the smooth operation of the foreign exchange market.