Since August 2020, the exchange rate of RMB against the US dollar has “broken 7” for the first time in the offshore market. But it is still strong against non-US currencies. On the evening of September 15, the exchange rate of the offshore RMB against the US dollar, which more reflected the expectations of international investors, fell below the integer mark of “7” during the session, and fell to a minimum of 7.0183. At the same time, the exchange rate of the onshore RMB against the US dollar was also approaching the “7” mark, with a minimum depreciation of 6.9962.
The current round of RMB exchange rate decline began on August 15 when the central bank cut the interest rate on the Medium-Term Lending Facility (MLF), and at the same time, the US dollar index kept hitting new 20-year highs. With the drop below the “7” mark, the exchange rate of the offshore RMB against the US dollar in this round has fallen by more than 2,600 basis points, or more than 3.88%. In the face of this round of devaluation, the central bank took decisive action on September 5 and decided to lower the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points from September 15, 2022, that is, the foreign exchange deposit reserve ratio will be lowered from the current 8% to 6%. %.This is the second time this year that the central bank has lowered the foreign exchange deposit reserve ratio.In the face of this round of devaluation, Liu Guoqiang, deputy governor of the central bank, responded at a briefing of the State Council Information Office on September 5, saying that at present, China’s foreign exchange market is operating normally, and cross-border capital flows are orderly. There is an impact, but the impact is controllable. Liu Guoqiang stressed that the RMB has not experienced a comprehensive devaluation. He pointed out that the United States has increased its monetary policy adjustment recently. Against the background of the appreciation of the US dollar, other reserve currencies in the SDR basket have depreciated significantly against the US dollar, but compared with other non-US dollar currencies, the depreciation of the RMB is the smallest.
Since the beginning of this year, the central parity of the RMB against the euro has appreciated by 4.15%, the central parity of the RMB against the Japanese yen has appreciated by 12.3%, the central parity of the RMB against the British pound has appreciated by 6.9%, the central parity against the New Zealand dollar has appreciated by 3.99%, and the central parity of the RMB against the Australian dollar has risen slightly It depreciated 1.29% and depreciated 5.40% against the central parity of the Canadian dollar. Regarding the key point of breaking 7, the co-chief economist of CITIC Securities clearly pointed out that in the context of a strong dollar, whether the key point of the RMB exchange rate breaking 7 is no longer so important, and the complex and volatile international situation should be viewed rationally. fluctuations in exchange rates. He pointed out that the central bank has a wealth of policy tools to stabilize the exchange rate, including but not limited to initiating counter-cyclical factors, adjusting macro-prudential adjustment parameters for cross-border financing of enterprises, and so on. Among them, the “countercyclical factor” will directly affect the quotation model of the central parity price of RMB against the US dollar. Although it is still unclear whether the central bank has enabled the “countercyclical factor” and whether some quotation banks have adjusted the central parity quotation model, based on historical experience Look, the above tool is very effective in dealing with the continuous unilateral devaluation of the RMB.
Everbright Securities also believes that since the beginning of this year, in the process of the continuous depreciation of the RMB exchange rate, the People’s Bank of China has hardly used policy tools to adjust the exchange rate, indicating that the current fluctuation range of the RMB exchange rate is still within the policy orientation, mainly due to stable growth and employment protection. The pressure exceeds the external balance, and the People’s Bank of China’s tolerance bottom line for the exchange rate has increased. If the depreciation pressure exceeds the policy tolerance bottom line, policy adjustment tools such as forward foreign exchange risk reserves and counter-cyclical factors cannot be ruled out. When looking into the future, Liu Guoqiang emphasized: “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. This is a long-term trend. But in the short term, two-way fluctuation is a normal state. There is a ‘unilateral market’, but the point of the exchange rate is unpredictable. Don’t bet on a certain point. We like to see a reasonable balance and basic stability, and we also have strength to support it. Something happened.”