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Fell below 7.32! RMB lower again! September exchange rate how to go? Real estate recovery is still the key
Sep 11,2023
The dollar index continued to strengthen, driving the yuan's continued decline against the dollar. Yesterday, the onshore and offshore RMB exchange rate against the US dollar once both fell below 7.32!
After two consecutive weeks of gains, on September 6, the spot exchange rate of the RMB against the US dollar fell below the 7.31 mark at the opening, and then further fell below the 7.32 mark. The lowest intraday hit 7.3217, approaching the weakest level in October last year (7.3285). Subsequently, the spot exchange rate of the RMB against the US dollar recovered the 7.32 mark.
Renminbi nears one-year low
Since the beginning of this year, the foreign exchange market has been running smoothly on the whole, and the RMB exchange rate has remained basically stable at a reasonable and balanced level. In August, the RMB exchange rate against the US dollar showed a depreciation trend, and the onshore and offshore RMB exchange rates against the US dollar both fell below 7.3.
With the strengthening of the US dollar index in recent days, the increase in the exchange rate of RMB against the US dollar brought about by the central bank's announcement of lowering the foreign exchange deposit reserve ratio of financial institutions has been erased.
On September 1, the central bank announced that from September 15, 2023, the foreign exchange deposit reserve ratio of financial institutions will be reduced by 2 percentage points, that is, the foreign exchange deposit reserve ratio will be reduced from the current 6% to 4%. After the announcement, the offshore yuan rose significantly against the dollar, once up more than 290 points.
However, starting this week, the yuan fell again and A shares also showed a volatile trend. Although China's manufacturing boom rose to expansion again in August, service sector expansion decelerated and economic recovery momentum remained weak.
The recently announced Caixin China manufacturing PMI in August recorded 51, 1.8 percentage points higher than the previous month, the second highest in the year, only lower than February; the service industry PMI fell 2.3 percentage points to 51.8.
The rebound in the manufacturing sector was lower than the slowdown in the service sector, dragging down the month's composite PMI by 0.2 percentage points, a 51.7, the lowest since February.
At the same time, the high dollar index is one of the key pressure points for the RMB exchange rate. As of 16:25 on September 6, the dollar index was near 104.7, with the impact 105 a key level. "The dollar index looks unstoppable, closing at a new high since March." Jiasheng Group senior analyst Jerry Chen told reporters.
Or will continue to be in the grinding bottom stage
Since September 4, the offshore yuan has fallen again. Looking forward to the future, the National Economic Research Center of Peking University believes that with the frequent emergence of favorable policies, the domestic economy may stabilize and rebound, and the market is expected to gradually stabilize. The central bank will use exchange rate stabilization tools in due course, which will support the RMB in the future.
Therefore, the RMB exchange rate is expected to fluctuate in both directions in the 7.20-7.35 range in September.
Dongguan Securities analysis, August 15 exceeded the expected interest rate cut that the current central bank monetary policy is more to me-oriented, is expected to follow the monetary policy easing orientation will continue, China-US interest rate differentials will remain high, short-term exchange rate flexibility is relatively liberalized.
CICC pointed out that the RMB exchange rate may continue to face a more complex and severe internal and external environment in September. Among them, the probability of the US dollar index and US bond yields falling significantly in September is low, and internal factors will continue to be weak in September.
However, the possibility of further deterioration is also low. Therefore, it is believed that the RMB exchange rate may continue to be in the bottoming stage under the maintenance of the stable exchange rate policy. After waiting for positive changes in internal and external fundamental conditions, the rebound market may start.
Real estate recovery remains key
Traders are still generally waiting to see the transmission effect of the real estate stimulus policy. Last week a series of stimulus policies to drive market sentiment, but the effect is still to be seen.
In the eyes of investment institutions, real estate is an extremely important sector of the economy. It drives upstream and downstream industries and accounts for 65% to 75% of the wealth of Chinese households. The future recovery of real estate will be closely related to the performance of the RMB exchange rate.
Lu Ting, chief economist of Nomura China, told reporters that the real estate problem not only explains why some economic indicators have been lower than expected in the past six months, but also reflects the downward pressure on the economy in the coming months.
"Even though many loose policies have been introduced in the past month, they are still not strong enough and not comprehensive enough. It can stimulate real estate in some first-tier cities and second-tier cities (the final results need to be verified).
However, it is likely to cause a 'crowding-out effect' on the real estate in the vast number of third-and fourth-tier cities, that is, some resources may be absorbed into big cities. At present, the main business projects and reserve land of the problem housing enterprises are precisely in the vast number of low-tier cities, such as country garden."
At the same time, in the view of institutions, the government also needs to continue to support developers to complete the task of "guaranteed delivery" to ensure that delivery can stimulate other demand and enhance the enthusiasm of ordinary people to buy houses in the future.
At present, Nomura expects China's GDP to climb 0.2 percent month-on-month in the third quarter, 3.7 percent year-on-year, and 4 percent in the fourth quarter, which means that the annual average is 4.6 percent. Lu Ting believes that China is expected to achieve a growth target of about 5% this year, but the situation next year remains to be seen.
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