RMB Exchange Rate Shocks Rebound, Limited Dollar Uplink Space

At present, the uncertainty of the US dollar election and the European situation is rising again, and in view of the fact that the US major interest rate hike in December has been basically digested by the market, the US dollar index has further risen and lacks sustained momentum.

In contrast, the recent economic growth in China has provided some basic support for the RMB exchange rate. At the policy level, there is a possibility of reopening the exchange rate. The rate of RMB exchange rate will stabilise near 6.8, and the adjustment space is limited.

Following the "black October", the recent decline in the RMB against the US dollar slowed down significantly.

On Monday (October 31st), the central parity of the RMB against the US dollar was set at 6.7641 yuan, up 217 basis points from the previous day, the biggest increase in more than a month.

Following Tuesday's call back to 93 basis points, the central parity of RMB against the US dollar again increased by 172 basis points Wednesday, at 6.7562 yuan, rising to nearly two weeks high.

The renminbi's exchange rate against the US dollar has also rebounded this week.

In October 31st, the spot exchange rate of the RMB against the US dollar on the shore was closed at 6.7708 yuan, up 87 basis points. In the Hongkong market, the offshore RMB exchange rate against the US dollar was 6.7778 yuan, up 109 basis points.

In November 1st, the offshore RMB exchange rate dropped 36 basis points against the US dollar at 6.7744 yuan, or less than the adjustment of the intermediate price.

Bank of China International said that under the background of domestic interest rates, the difference in return on assets between China and the United States has been narrowing, and funds are facing external pressure. From this perspective, there is still pressure of endogenous depreciation in the RMB exchange rate.

However, in the context of the current trade surplus is still positive, and the central bank's ability to control exchange rate is still relatively high, the RMB continues to depreciate space is relatively limited.

In the course of the current RMB devaluation, enterprises' liabilities to the US dollar and the allocation of overseas assets by residents have become the main force of RMB devaluation, which is the main logic of RMB depreciation.

At present, the US dollar debt has come to an end. A great part of the depreciation has been released, and we have judged that the Fed's rate hike is not as strong as expected.

Therefore, we can see that the RMB exchange rate is likely to have an inflection point in December.

Huatai Securities said.

From the perspective of comprehensive institutions, although the RMB exchange rate is still facing in the short term.

The pressure on interest rates is approaching, domestic real estate regulation and other pressures, but the uncertainty of the US election results is rising. After the US dollar or concussion stabilizes, coupled with the support of domestic fundamentals and policies, the RMB exchange rate in the short term will be dominated by two way small fluctuations, and the space for continued adjustment within the year will be relatively limited.

On the 2 day, the exchange rate of the RMB against the US dollar on the shore opened at close to 100 points with the middle price. Most of the time, it fluctuated at a high level in most days. It rose significantly at about 16 o'clock, and finally closed at 6.7613 yuan, up 131 basis points compared with the previous day. In the Hongkong market, the offshore RMB exchange rate against the US dollar also rebounded yesterday, and up to 15 hours in Beijing at 16:30 on November 2nd, rising to 6.7720 yuan.

On the whole, the central parity of the RMB against the US dollar has rebounded by nearly 300 basis points compared with the lowest 6 years in October 28th. The offshore RMB exchange rate against the US dollar has rebounded by more than 240 basis points, and the offshore RMB exchange rate against the US dollar has also rebounded more than 260 points.

As a result, the RMB exchange rate against the US dollar has weakened due to the continued strength of the US dollar. The recent rebound in the RMB exchange rate has also benefited mainly from the short-term adjustment of the US dollar.

Data show that after hitting 99.12 of the recent high point, the dollar index showed a clear callback, yesterday hit 97.38 in the market, nearly a week down nearly 1.3%.

Analysts pointed out that the recent decline in the US dollar was mainly attributable to two points: first, in October 28th, FBI announced the restart of the Hilary mail door survey, which sharply increased uncertainty at the imminent stage of the US presidential election. Affected by this, the Fed's interest rate hike was expected to cool somewhat during the year, and the US dollar fell sharply. Secondly, the US dollar index hit a new high this week. The intraday market once exceeded 99, and there is a pressure of callback on the technical side of 100.

Looking back at the past October, the exchange rate of the RMB against the US dollar not only broke through the 6.7 pass which was hard to break before the market expectation, but also fell steadily with the US dollar going strong, and it approached the 6.8 pass at one go.

As the market generally recognised, the strength of the US dollar is the direct push of the current depreciation of the RMB against the US dollar.

Analysts pointed out that this strong dollar has superimposed the expected warming of the Fed's rate hike, the rise of overseas risk aversion and the weakening of the yen's weakening of the US dollar, making the US dollar rise since October stronger than before, and directly contributed to the rapid derogation of the RMB.

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Data show that in October, the US dollar index rose more than 3%, the biggest monthly gain in the past 11 months.

Correspondingly, the main currencies in October depreciated against the US dollar, of which the Japanese yen depreciated 4.48% against the US dollar, the euro depreciated 2.75% against the US dollar, the British pound depreciated 6.90% against the US dollar, and the offshore renminbi against the US dollar also depreciated by 1.57% and 1.56% respectively.

It is worth noting that since October this year, the exchange rate spreads between the two sides of the Taiwan Strait have not widened, indicating that the market depreciation of the renminbi is still relatively calm.

From the perspective of comprehensive institutions, the follow-up trend of RMB exchange rate remains unchanged.

The trend is closely related.

Although the Fed's interest rate hike in December is still stronger than expected, the US dollar index is likely to rise and fall. However, after the dollar reopened to the 100 point, faced with resistance from the integer barrier, coupled with the sudden increase in the US presidential election situation, the uncertainty of the European situation has also disturbed the interest rate hike, and the US dollar's upward momentum has not been enough.

Shen Wan Hongyuan Securities said that the Federal Reserve will hold a FOMC meeting early this month. Before the election, the Fed will refuse to move, but it will hint at the prospect of raising interest rates in December. FBI is once again involved in Hilary's "mail door" survey, which will increase the uncertainty of the US presidential election. With the approaching of the election period, the US dollar or market sentiment will lead to a concussion. The result of the election will be stabilized or gradually stabilized. In this process, the RMB exchange rate will be correspondingly concussion, but the pressure of unilateral passive devaluation will be eased.

In general, the main reason for the current US dollar index to rise or fall is that the rate hike is expected to continue in December.

However, most market participants expect that in the process of gradual increase in interest rates of the Fed, the peak of the US dollar index is bound to be difficult to match with the first two rounds. Perhaps 100 is a hard nut to crack. In view of the fact that the us great interest rate hike in December has been basically digested by the market, there will be limited space for further upward movement in the US dollar index in the year, and the pressure on RMB depreciation and foreign exchange outflow will ease.

From the domestic point of view, the latest economic data released in October showed a great probability that the economy will continue to operate smoothly during the year. This further provides a basic support for the exchange rate.

Market participants also believe that after the RMB exchange rate is close to the 6.8 pass, the release of the pressure of depreciation will basically come to an end, and the policy level has the possibility of restarting the exchange rate.

Overall, it is expected that the approximate rate of RMB exchange rate will stabilize near 6.8, and there will be limited room for further adjustment within the year.

Guotai Junan Securities pointed out that, from the internal view, led to the October RMB

The main trigger factors of the fall include four points: first, after entering October, the demand for policy stability is weakening; the cumulative depreciation pressure in September has been released once and for all, resulting in the acceleration of the depreciation process; two, relative to the "slow demoted", the "faster derogation" has a greater impact on the residential sector, triggering a market share of "follow the wind" nature; three, the short-term adjustment of the property market is expected to lead to a short-term "spillover" of funds; four, the deficit in cross-border payment of RMB has reached a new high, pushing up the devaluation pressure of the offshore market and pmitting to the shore to a certain extent.

Analysts at the brokerage believe that the pressure of foreign exchange settlement caused by blind swap may soon be suppressed by exchange rate stabilization or even appreciation.