Up! Up! Up! Why is the appreciation of the RMB so fast?

 A few months ago, people who traded yuan for dollars, The intestines may be green these days. Because the yuan is rising, And the dollar is falling. The median exchange rate of the yuan against the dollar on 29 May was 7.1316, On 2 September it was 6.8376. From 7.1316 to 6.8376, If we exchange $50,000, It was 356 thousand and 58 yuan, It's only 341880 RMB today, Can save 14700 yuan. Visible, How much the yuan has risen recently.

Data show The yuan's median exchange rate against the dollar has risen to a high for more than a year. The People's Bank of China authorized the China Foreign Exchange Trading Center to announce, On September 2,2020, the intermediate exchange rate of RMB in the interbank foreign exchange market was 6.8376 yuan, Up 122 basis points from the previous trading day. The yuan's median exchange rate against the dollar has risen for seven consecutive days, Set a new high since May 14,2019. The offshore and onshore RMB exchange rate against the US dollar is also "a rise ". 1 September, Both offshore and onshore yuan rose to the 6.82 marks, Among them, The offshore renminbi was once set to a record high of 6.8134 since May 2019, The day rose more than 400 points. For a moment, Why is the RMB exchange rate strong, Whether the RMB appreciation trend can continue, Become the topic of market concern and hot discussion.

According to the experts interviewed, The main reasons for the yuan's strength are three aspects: 

one is the weakening of the dollar index.

 In general, The strength of the dollar index is inversely related to non-dollar currencies such as the renminbi, You're strong, I'm weak, If you're weak, I'm strong. Data show, Since late May, The dollar index started falling, More recently, it fell below 92, Set a new low since early May 2018. Wen Bin, the chief researcher at Minsheng Bank of China, told Xinhua, Because of the Fed's sky currency, In anticipation of a weaker dollar, The dollar index continues to fall, Non-American currencies, including the renminbi, have appreciated. In the view of CITIC Securities fixed income chief analyst Mingming, The Fed has launched an unprecedented massive monetary easing since the outbreak, And the Fed has adjusted its monetary policy framework, the introduction of "average inflation system ". July, U.S. bond yields that have been held down further, At the same time, the dollar index is basically from late July opened the "dollar shortage" after the end of the second phase of a significant decline. 

Second, China's economic fundamentals continue to improve. 

"China's epidemic prevention and control have achieved remarkable results, China's economy continues to improve, Major economic indicators are improving, China was the only major economy with positive growth in the second quarter, This is strong support for the yuan ." Wen Bin said. According to the NSO, China's economy continued to recover steadily in July, Among them, For the first time in July, retail sales grew from negative to positive, Export growth reached double digits. And the latest announcement of the August manufacturing purchasing manager index, non-manufacturing business activity index and comprehensive PMI output index, the three indexes have been kept above the critical point for six consecutive months. And clearly, The stronger yuan is also a reflection of China's economic fundamentals. From the performance of the manufacturing PMI index, After a precipitous fall in February, China's economy continues to recover, Both the World Bank and the International Monetary Organization predict that China will be the few countries to achieve positive economic growth this year, Therefore, after the outbreak of domestic fundamentals to provide important support for the RMB exchange rate.

 Third, RMB assets are popular. 

Wen Bin points out, China is continuing to open up financial markets, International investors are bullish on China's economic prospects and renminbi assets, Foreign capital continues to flow into China's capital markets, It is conducive to the appreciation of the RMB. According to data recently released by the State Administration of Foreign Exchange, July, The net increase in foreign capital holdings of domestic listed stocks and bonds increased by 1.4 times over the same period last year, The balance of foreign exchange reserves is growing for four consecutive months. Mingming said, In the context of global central bank easing, The People's Bank of China's monetary policy remained cautious and determined during the outbreak, The spread between China and the United States remained high, The attractiveness of the yuan's assets has increased significantly, This also promoted the strength of the RMB exchange rate. As of 28 August, A representative spread of more than 230 basis points on China-US 10-year bonds, The wider spread between China and the United States and the higher returns on the renminbi's assets inflows of foreign capital, The appreciation of the RMB exchange rate plays a role in promoting. 

What is the future trend of the RMB exchange rate?

 In general, Appreciation is conducive to import, travel abroad, consumption and study abroad, But it will have a negative impact on exports. Actually, our mold manufacturing business already slows down. the more bad news is injection molding business will worse even because of the exchange rate dow.

 So, For the currency, The outside world is also very concerned. For the next phase of the RMB exchange rate, Wen Bin's analysis, In the short term, Because China's economy continues to pick up, International investors are bullish on capital markets, Continued inflows of foreign capital, These factors are expected to further boost the appreciation of the renminbi. But, uh, In the medium to long term, With the further marketization of the RMB formation mechanism, The RMB exchange rate will maintain two-way fluctuations at a reasonable equilibrium level.  Clearly, analysis, the yuan exchange rate strength or will continue, but in view of the possible risks in the future, including global risk aversion, Sino-US relations and asymmetric capital controls, the yuan exchange rate may show a slow slope appreciation trend, short-term RMB exchange rate range or 6.7~6.8. At the same time, it should be noted that the continued appreciation of the exchange rate may have a certain impact on Chinese exports and manufacturing. China's monetary policy implementation report for the second quarter of 2020, issued by the central bank in August, proposes to deepen the market-oriented reform of the exchange rate, improve the floating exchange rate system based on market supply and demand, with reference to a basket of currencies, maintain the flexibility of the RMB exchange rate, and give full play to the role of the exchange rate as an automatic stabilizer for macroeconomic and balance of payments adjustment. Stable market expectations, maintain the RMB exchange rate in a reasonable equilibrium level of basic stability.