RMB Or Ushered In Its First Annual Depreciation

The Central Bank of China tried to target the RMB exchange rate, while market investors pressed their exchange rate to its lowest level since July.

10, China's interbank foreign exchange market, the central parity of RMB against the US dollar increased for fourth consecutive trading days.

According to data from the foreign exchange trading center, the central parity of RMB against the US dollar was set at 6.1195 on 10 days, up 216 basis points from 6.1411 in December 4th, and has reached a new high of nine months since March 4th.

The intention of the Central Bank of China to raise the middle price and stabilize the trading price of the RMB market is obvious. However, the RMB spot exchange rate has depreciated sharply in recent days. The maximum depreciation of the two trading days is close to 600 points.

The gap between the RMB spot rate and the central parity of exchange rate has expanded to the highest level since the summer.

China's November trade figures released on Monday were particularly weak. Data showed that exports showed the slowest growth in 6 months, and imports fell by 6.7% over the same period last year.

Recent data show that China may have difficulty achieving GDP growth of 7.5% this year.

News came that investors further reduced the RMB exchange rate.

On Tuesday, it was reported that China Securities Depository and Clearing Co., Ltd. was tightening up the qualification examination of securities that could be used for repurchase operations.

China Securities Depository and Clearing Co., Ltd. no longer accepts the buy back application of the bonds with a rating below AAA level, and no longer accepts the issuance application of a rating less than AA level issuer.

The final result will be that $76 billion worth of corporate bonds will not be able to carry out buyback operations.

This will lead to higher borrowing costs, especially for enterprises which are not sufficiently rated, which in turn may raise the default rate.

After the news came out, with the increase of relative liquidity demand, China's swap interest rate rose rapidly.

The spot exchange rate dropped sharply, reaching 363 points.

In the fourth years after the resumption of RMB exchange rate reform, the RMB against the US dollar has finally changed its unilateral appreciation, and this year it is likely to have its first annual depreciation.

Today, the US dollar continues to strengthen and the Chinese economy returns to the downside. The central bank has announced interest rate cuts to deal with low inflation. In the remaining fifteen trading days, the RMB has a stronger momentum of appreciation, unable to fill the remaining space, and it seems to have been firmly on the dollar's annual depreciation.

According to the current situation, the spot exchange rate of RMB may be reduced to 6.20.

However, compared with other major currencies, the value of RMB will depreciate more than 10%.

The range is still controllable and slight.

In major international

In the case of revaluation, the RMB is still linked to the US dollar, leading to a strong performance of the RMB real effective exchange rate.

According to the data released by the International Bank of liquidation, the RMB effective exchange rate index increased by 1.5% to 121.57 in October and a record high.

The effective exchange rate index of BIS is based on the weight of trade data for 2008-2010 years and is based on 2010.

In the weight of the RMB index, the euro, the US dollar and the yen are the top three.

The appreciation of the real effective exchange rate is more reflected in the passive appreciation of the renminbi in the case of the sharp depreciation of the euro and the yen.

The near future

The depreciation of the spot exchange rate is a concentrated release of the callback demand in the short term, coupled with the continued appreciation of the US dollar and the confirmation of the negative economic data in China.

In the process of devaluation of the RMB spot exchange rate, the central bank intervention was not seen in the market, which further exacerbated the depreciation of the RMB.

However, in the short term, the spot rate of RMB may be slightly trimmed on the 6.20 front line.

Because the intention of policy bias to exchange rate stability is more obvious, the possibility of continuous depreciation of RMB will be relatively small in the future, so investors need not be overly alarmed.