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[Hongde Information] Exchange rate both rose above "6.9"
Jan 05,2023
At the beginning of the new year, the RMB exchange rate continued the appreciation trend at the end of the previous year. On the first trading day of the new year, the central parity rate of RMB against the US dollar, onshore RMB against the US dollar, and offshore RMB against the US dollar were all in a state of appreciation.
On January 3, the onshore and offshore RMB exchange rates against the US dollar both recovered 6.90 in intraday trading, and then fell slightly, but the overall appreciation channel. Among them, the onshore RMB opened up, up nearly 300 basis points from the closing of the previous trading day, and continued to rise after the opening, with the highest appreciation to 6.8733, an increase of nearly 800 basis points; the offshore RMB fluctuated and appreciated after the opening of the day, with the highest appreciation to 6.8791, up nearly 500 basis points from the closing of the previous trading day.
On the same day, the central bank authorized the China Foreign Exchange Trading Center to announce that on January 3, 2023, the central parity of the RMB exchange rate in the inter-bank foreign exchange market was: 1 U.S. dollar to RMB 6.9475 yuan, and the central parity of the previous trading day was reported at 6.9646 yuan, which was increased by 171 basis points in a single day. Continued the appreciation trend of the previous trading day.
Looking back on December 30, 2022, the onshore RMB exchange rate against the U.S. dollar once recovered the "6.9" mark, for the first time since September 5, 2022, the highest intraday hit 6.8922; the offshore RMB exchange rate against the U.S. dollar intraday hit 6.9011, a new high since September 5, 2022.
The recent rise in the RMB exchange rate is mainly influenced by a number of factors, on the one hand, the improvement in sentiment. With the gradual optimization of epidemic prevention and control measures, economic and social life will gradually return to the right track, and the market is more confident about economic growth in 2023. On the other hand, it comes from the trading surface support. Due to liquidity needs, corporate foreign exchange settlement has increased. Foreign institutions have strengthened their expectations of China's accelerated economic recovery, and they have been bullish on RMB assets, and cross-border capital inflows are also increasing.
After entering 2023, whether the RMB exchange rate can continue the previous trend and return to the high point of appreciation is also a topic of concern to the market. In the view of many market participants, the stability of China's economic fundamentals is a strong support for the resilience of the RMB. The improvement of the internal and external macro environment will help to enhance the attractiveness of RMB assets, and the RMB will operate near a reasonable equilibrium level.
In addition, in the context of the normalization of two-way fluctuations in the RMB exchange rate, the People's Bank of China has repeatedly reiterated that it will optimize the management of expectations and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. Central bank governor Yi Gang has mentioned that since 2022, the yuan has been relatively stable against a basket of currencies, depreciating against the dollar, but appreciating against other major currencies. In the future, the central bank will insist on the decisive role of the market in the formation of the exchange rate. The RMB exchange rate will continue to remain basically stable at a reasonable and balanced level, and the value and purchasing power of the RMB will remain stable. Regarding the long-term trend of the RMB exchange rate, Liu Guoqiang, deputy governor of the central bank, has also emphasized that the long-term trend of the RMB should be clear, and the world's recognition of the RMB will continue to increase in the future.
"The rise in the renminbi that began in late November 2022 may not be a short-term adjustment fluctuation, but a trend rise, and the renminbi may rebound next." Chen Hongbin, chief economist of Pengyang Fund, believes that domestic real estate, epidemic and other problems will gradually improve in 2023, the leading indicators of the U.S. economy may decline significantly in the second and third quarters of 2023, the fundamentals of China and the United States may be misplaced in 2023, and the RMB may start a new upward cycle.
Wen Bin, chief economist of Minsheng Bank, said that it is expected that the overall RMB exchange rate in 2023 will show two-way fluctuations, moderate recovery, and gradually approach a long-term reasonable range. "In the first quarter, the RMB exchange rate fluctuated significantly in both directions and continued to see-saw at key points. In the second quarter, as China's domestic demand recovered and the Federal Reserve's interest rate hike drew to a close, the exchange rate may appreciate somewhat in the fluctuation. Seasonal pressure in the third quarter may make the exchange rate face a correction. The risk of recession in the United States increased in the fourth quarter, and the exchange rate is expected to return to a moderate appreciation." Wen Bin said.
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