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What is the future? Return to the "6" era! The exchange rate of RMB against the US dollar recovered the "7" mark, soaring nearly 1,000 points in a day!
Dec 07,2022
Recently, the onshore and offshore RMB against the U.S. dollar exchange rate both recovered the "7" mark. This is the yuan's return to within 7.0 against the dollar since September.
On the 5th, the RMB exchange rate continued to appreciate, and the offshore RMB exchange rate against the US dollar rose by more than 600 basis points in a day, taking the lead in rising back above the 7.0 mark. As of the day before, the offshore RMB exchange rate against the US dollar was 6.9511.
As of the day, the onshore yuan was 6.9542 against the U.S. dollar, up 960 basis points from the previous closing price.
The central parity rate of the RMB against the US dollar also rose. According to data released by the Foreign Exchange Trading Center, on December 5, the median price was reported at 7.0384 yuan, an increase of 158 basis points from the previous trading day.
On September 15 and 16 this year, the exchange rates of offshore RMB and onshore RMB against the US dollar successively fell below the "7" mark, and then fell all the way to 7.3748 yuan and 7.3280 yuan respectively.
After the rapid depreciation of the exchange rate in the early period, the RMB exchange rate has recently rebounded sharply. Judging from the November data, after several consecutive months of depreciation, the RMB exchange rate rebounded strongly in November. The onshore and offshore RMB exchange rates against the US dollar rose by 2.15 and 3.96 respectively, the largest monthly increase in the first 11 months of this year.
At the same time, the dollar index continued to fall on the morning of the 5th. As of the day before, the dollar index was at 104.22 points. In November, the dollar index had depreciated by 5.03 per cent.
According to the 21st Century Business Herald, a foreign exchange trader at a Hong Kong bank said that the recent rapid rise in the RMB exchange rate is mainly affected by four major factors.
First, the Fed's expected slowdown in future rate hikes has plunged the dollar index;
Second, the continuous optimization of epidemic prevention measures has boosted the confidence of financial markets in the sound development of China's economy;
Third, overseas capital has been bottoming out Chinese assets, driving up demand for the yuan;
Fourth, the demand for foreign trade enterprises to settle foreign exchange rose at the end of the year, pushing up the phased valuation of the RMB exchange rate.
On the news side, last weekend, in addition to the four municipalities directly under the Central Government of Beijing, Tianjin, Chongqing, and Shanghai, 10 provincial capitals including Shijiazhuang, Guangzhou, Kunming, Nanning, Harbin, Zhengzhou, Wuhan, Jinan, Nanchang, Hangzhou, and some major cities such as Shenzhen Also announced measures to optimize citizens' travel.
The optimization measures in terms of travel in various places mainly focus on canceling the negative nucleic acid test certificate in public transportation in the city. Some cities have made it clear that green codes can be used when purchasing drugs or general outpatient clinics in hospitals.
At the same time, the United States in November non farm data better than expected, indicating that the interest rate cycle under the employment market is still strong. Powell said that "it makes sense to slow the pace of interest rate hikes when it is close to a level sufficient to curb inflation."
So far, according to CME "Fed Watch": the probability of the Fed raising interest rates by 50 basis points in December to 4.25-4.50 range is 78.2, and the probability of raising interest rates by 75 basis points is 21.8;
The probability of a cumulative interest rate hike of 75 basis points by February next year is 46.1 per cent, the probability of a cumulative interest rate hike of 100 basis points is 44.9 per cent, and the probability of a cumulative interest rate hike of 125 basis points is 8.9 per cent.
On December 3, during the International Financial Forum (IFF)2022 Global Annual Meeting held in Nansha, Guangzhou, several chief economists of financial institutions predicted the trend of RMB in 2023.
Some chief economists believe that the renminbi is currently undervalued and there is room for a rebound in 2023. Some people believe that there is still room for the United States to raise interest rates in the short term, and the U.S. dollar has a chance to strengthen again. The renminbi will maintain a range of shocks in the first half of next year. In the second half of the year, there may be a reversal in the context of domestic economic stabilization.
Ding Shuang, Wang Tao, Lu Ting and other three chief economists of foreign financial institutions are inclined to continue to strengthen the US dollar in the short term. In the first half of next year, the RMB will continue to fluctuate. In the second half of next year, as the economy stabilizes, it may re-enter the appreciation channel.
Wang Tao, chief economist of UBS Securities in China, said that because there are still many uncertainties, there is still a possibility that the US dollar will rise again in the next two or three months.
But next year, with the improvement of the epidemic situation, the opening up of the economy as a whole, especially confidence in the Chinese economy, the second half of next year should be the appreciation of the yuan, to within 7 also has a greater probability.
Ding Shuang, chief economist for China and North Asia at Standard Chartered Bank, said that a relatively strong rebound in China's economy may have to wait until the second half of next year, and the recent recurrence of the epidemic will have an impact on economic activity, with short-term central bank monetary policy still on the loose side.
From a spread perspective, the spread between the U.S. and China will still widen in the short term. The renminbi is expected to appreciate in the second half of next year.
Lu Ting, China's chief economist at Nomura Securities, said that the recent repeated fluctuations in the RMB exchange rate are likely to continue to be in this stalemate. The probability of the Fed raising interest rates to more than 5% is very high, and there is still room to raise interest rates. During the implementation of China's adjusted epidemic prevention policy, the possibility of a significant depreciation of the RMB again should be very small.
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