The RMB exchange rate in the recent period encountered a substantial depreciation, once set a 10-year low!
But these two days, the RMB depreciation momentum also has no sign of releasing aid, easily broke through 1:7.1. On May 28th it hit 7.1964 at one point, followed by a slowdown in the renminbi and a rebound. As of the close, the yuan was 1:7.1364 against the dollar. Experts say the yuan is likely to continue to fall against the dollar in the short term and investors should be cautious about bottoming out.Now, everyone is looking for the reason why the yuan has plummeted? The main reasons for our analysis are as follows: first, the moderate depreciation of the RMB exchange rate is beneficial to Chinese export enterprises. Affected by the new crown epidemic, the European and American market demand plummeted, a large number of orders were canceled. At the same time, developing countries such as Russia, India, Brazil, and Argentina have also experienced outbreaks, and economic growth has also been affected by the epidemic. In order to enhance the competitiveness of China's exports in this special period and ease the export pressure of export commodities, it is necessary for China to keep the RMB exchange rate in a relatively low position.
Moreover, domestic monetary policy is generally loose. After the outbreak, the domestic economy was restarted and investment plans for infrastructure projects were launched. This year has been several domestic cut, interest rate cuts, and our central bank has said that the follow-up cut, there is room for interest rates. It is clear that domestic monetary policy will continue to be looser in order for the economy to recover in the second half of the year, and in each case, the depreciation of the renminbi is expected
- Finally, the outbreak of the new crown has brought uncertainty to the global economy, the European and American economies are depressed, and China's economic recovery is still some time. As a result, a large number of hot money are holding dollars to avoid risk, which led to the recent global "dollar shortage ", and the continued strength of the dollar index, always hovering between 98-100 high, which also led to a sharp fall in non-US currencies, and the dollar and the yuan exchange rate showed a negative correlation, so the yuan exchange rate has a trend decline.
- Are many now worried that the yuan will fall below 8% against the dollar? I think this worry is superfluous. First, the current RMB has accelerated the pace of internationalization. On the one hand, Chinese A stocks are officially listed in international indexes such as MSCI, and some overseas hedge funds will flow into China through QFII、RQFII and other channels for asset allocation. On the other hand, China has launched the Shanghai crude oil and gold futures market, which is priced and settled in RMB. This will greatly promote the internationalization of the yuan, driving up the demand for the yuan for overseas investors, thereby promoting the appreciation of the yuan.
- Second, the U.S. is also reluctant to see the U.S. dollar index continue to be strong, the yuan continued to decline. Because a rapid depreciation of the yuan's exchange rate would improve the competitiveness of Chinese goods. In the current global recession, the United States still wants the dollar index to depreciate and the yuan to appreciate, thus increasing the competitiveness of American goods exports. If the yuan continues to fall, it is believed that the United States will control the dollar's appreciation process. So, the RMB exchange rate against the dollar depreciation space will not be too much, let alone go to "break 8".
- Third, only if the RMB exchange rate remains relatively stable can it benefit China's economic development. Moreover, China's RMB exchange rate is not completely market-oriented, China in addition to more than 300 million foreign reserves, there are many instruments to regulate exchange rate fluctuations. such as reverse repurchase factors, issuing central tickets in offshore markets, tightening loose monetary policy, and so on. As long as the state is willing to do so, it can contain the trend of the RMB exchange rate falling continuously. So, we think there may still be a fall in the yuan, but the probability of "breaking 8" is basically zero.
- After entering May, the renminbi has fallen all the way, especially in recent days, when it has fallen to record lows. The main reason is that the dollar has become a safe-haven currency, the dollar index is hovering high, plus China's monetary policy continued easing, which has increased the rate of depreciation of the renminbi. Although the renminbi has fallen sharply, it is impossible to "break 8 ;. Now all parties hope that the yuan exchange rate will be stable, which is conducive to the internationalization of the yuan, conducive to the recovery of China's economy, and the Central Bank of China is fully capable of stabilizing the yuan exchange rate and stabilizing the exchange rate in a large box.
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