21st Century Business Herald reporter Ye Maisui reported in Guangzhou On the morning of December 5, both the offshore renminbi and the onshore renminbi rose above 7, with an increase of more than 500 points, hitting a new high since September. As of press time (11:16), USD/CNH was temporarily reported at 6.9549, a decrease of 1.01%, and USD/CNY was temporarily reported at 6.9638, a decrease of 0.86%.
Liu Youhua, deputy director of the wealth research department of Paipai.com, told the 21st Century Business Herald that there are two main reasons for the rise of the RMB above 7:
First, the recent continuous favorable domestic policies have greatly enhanced the market’s confidence in China‘s economic recovery, thus playing a very good role in supporting the strengthening of the RMB;
Second, under the expectation that the Fed will slow down the interest rate hike, the US dollar may enter a downward channel, and the corresponding RMB will usher in an appreciation. However, the real strengthening of the RMB exchange rate may have to wait until next year when China‘s economic recovery is highlighted and the Fed’s interest rate hike cycle is confirmed to be over.
In addition, some analysts believe that overseas capital has been buying Chinese assets at the bottom, which has led to an increase in the demand for RMB; at the end of the year, the demand for foreign exchange settlement by foreign trade companies has increased, which has also pushed up the staged valuation of the RMB exchange rate.
Federal Reserve Chairman Powell delivered the last speech before the interest rate meeting. The theme was “Inflation and the Labor Market” which faced the Fed’s most concerned indicators. He confirmed that the pace of interest rate hikes will be slowed down as soon as December to reduce the risk of excessive tightening, but he also repeatedly emphasized that inflation driven by housing and services is too high, suggesting that restrictive interest rates will last longer and the end point will be higher than 9 monthly forecast. Powell’s speech was interpreted by the market as being dovish, and then the U.S. dollar index and U.S. bond yields fell back. U.S. stocks rose sharply during the session, and precious metals and financial commodities rose simultaneously.
CME “Fed Watch”, the probability of the Fed raising interest rates by 50 basis points in December to the range of 4.25%-4.50% is 77%, and the probability of raising interest rates by 75 basis points is 23%; the probability of raising interest rates by 75 basis points in February next year The probability of a cumulative rate hike of 100 basis points is 46%, and the probability of a cumulative rate hike of 125 basis points is 9.8%. In the context of the Fed’s current rate hike cycle, the interest rate futures market’s expectations for the peak interest rate have dropped from the previous 5%-5.25% to 4.75%-5%.
The high-intensity interest rate hike came to an end, and the U.S. dollar index adjusted sharply. On November 30, the U.S. dollar index fell by 0.78% on the last trading day of the month. With the end of the full month of trading, the U.S. dollar index fell by 5.02% overall in November, suffering the worst single-month performance in 12 years. Since the U.S. dollar index reached its highest point this year on September 28, the U.S. dollar index has fallen rapidly by more than 8%.
December has just started, and the U.S. dollar index also continued its downward trend, falling 0.51% on the 1st (as of 15:30). The current quotation is around 105.6, testing the support of 105 points.
According to data released by the US Commodity Futures Trading Commission (CFTC) on Monday (November 29), speculators’ net short positions in the US dollar rose to the highest since July 2021 in the latest week. The dollar’s net short position reached $1.82 billion in the week ended Nov. 22, compared with a net short position of $10.5 million the previous week. Speculators were net short on the dollar for the second week in a row.
The chief economist of CITIC Securities (20.810, 0.98, 4.94%) clearly believes that the current low point of the spot exchange rate of the RMB against the US dollar may have been confirmed, and the probability of the RMB exchange rate maintaining a wide range of volatility in the short term is relatively high. In the long run, the valuation performance of the RMB exchange rate in the future will gradually be dominated by the fundamentals of the steady growth of the domestic economy.
(Editor: Wen Jing)