China Securities News (Reporter Zhao Bai Zhinan) A reporter from China Securities News interviewed Guan Tao, global chief economist of Bank of China Securities, on October 27 on the recent trend of the RMB exchange rate. Guan Tao said that factors such as the dollar’s correction are the main reasons for the short-term appreciation of the RMB exchange rate. In the next step, the trend of the RMB exchange rate will continue to depend on market supply and demand, domestic economic fundamentals, and changes in international financial markets. It may appreciate or depreciate. The uncertainty of the exchange rate is inevitable. There will be ups and downs, and two-way fluctuations will continue. Is the norm.
Guan Tao believes that the main reason for the appreciation of the RMB exchange rate since October is that the US dollar index has experienced a high correction. Prior to this, the expected tightening of the Fed’s monetary policy pushed up the exchange rate of the U.S. dollar, and the U.S. dollar index center once rose to above 94. With the gradual digestion of expectations of monetary policy adjustments, the recent US dollar index has been sluggish and adjusted. Through the renminbi exchange rate pricing mechanism, the dollar exchange rate has a reverse guiding effect on the renminbi exchange rate, that is, a lower dollar index will push the renminbi to the dollar exchange rate higher to a certain extent. Second, there have been some adjustments in China’s economic data in the third quarter, and the market has run out of short-term benefits after the release of the data. In fact, China’s economic correction in the third quarter was not an isolated phenomenon, and the global economy experienced a correction. Beijing Capital adjusted its trading strategy after October 19 and resumed its net inflow. Third, China’s exports continued to perform well, the surplus remained at a relatively high level, and market supply and demand also drove the appreciation of the RMB exchange rate, which also reflected the better fundamentals of the domestic economy.
“On the whole, the RMB exchange rate has maintained normal two-way fluctuations.” Guan Tao said that since the beginning of this year, the RMB exchange rate has risen and fallen, and has generally remained basically stable. Among the major currencies, the RMB exchange rate is relatively stable.
From a medium to long-term perspective, Guan Tao believes that the RMB exchange rate is affected by a variety of factors at home and abroad, including changes in the international financial market, domestic economic fundamentals, market supply and demand, and sentiment. In the international financial market, as the Federal Reserve began to reduce debt purchases, the market’s expectations of the Federal Reserve’s interest rate hike next year are also rising, which may trigger the return of funds to the United States and re-push the US dollar exchange rate. This is against emerging market currencies including the RMB. It may cause a certain amount of pressure. In terms of supply and demand, the tension in the global supply chain is gradually easing, and China’s orders may be diverted again; the international economy is recovering hard and overseas demand may also weaken. There are some uncertainties in China’s high export growth, which will have a certain impact on the supply and demand relationship.
“The two-way fluctuation of the RMB exchange rate will still be the norm for a period of time in the future.” Guan Tao said.
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