The RMB Exchange Rate Against The Us Dollar Fell Below 7, And The Two-Way Fluctuation Will Still Be The Normal State Of The Rmb Exchange Rate
The exchange rate of the RMB against the US dollar has recently fallen below the "7" mark, which has once again aroused market attention. On May 19, the central parity rate of the RMB against the U.S. dollar was quoted at 7.0356 yuan, a decrease of 389 basis points from the previous trading day, the lowest since December 5, 2022. This week, the central parity rate of the RMB against the U.S. dollar was lowered by 169 basis points to 7.0326 yuan yesterday compared with the previous trading day.
Market opinion generally believes that the weakening of the RMB exchange rate is only a short-lived phenomenon. In the context of continuous improvement in economic fundamentals, the room for exchange rate adjustment is limited, and two-way fluctuations will still be the normal state of the RMB exchange rate.
Two-way fluctuation elasticity has been significantly enhanced
The last round of the exchange rate of RMB against the US dollar rose above "7" was more than 5 months ago. On December 5, 2022, the exchange rate of offshore and onshore RMB against the US dollar rose strongly, and both rose above the "7" mark. Going back further, on September 15 and 16, 2022, the exchange rate of offshore and onshore RMB against the US dollar fell below the "7" mark successively, and has been falling all the way since then.
In the past five years, the exchange rate of the RMB against the U.S. dollar has risen above "7" for three times and then returned below "7". It is September 2022. It took 5 months for the exchange rate of RMB to return to below "7" in the previous two times, and it will be shortened to 3 months in 2022. The research department of China Merchants Fund stated that the reduction in time proves that the exchange rate market has increased resilience and has the ability to achieve dynamic equilibrium. There is no need to worry too much about the RMB exchange rate breaking "7" against the US dollar. my country's foreign exchange market has resilience.
Since the beginning of May, the exchange rate of the RMB against the US dollar has continued to decline. On May 17, the exchange rate of the onshore and offshore RMB against the US dollar has successively fallen below the integer mark of "7", which is the first time in the past six months. Yesterday, the exchange rates of onshore and offshore RMB against the US dollar fluctuated around 7.05 and 7.07 respectively.
Limited impact on businesses and individuals
The current round of depreciation of the exchange rate of RMB against the US dollar is due to multiple factors, mainly including the price comparison factor of the strengthening of the US dollar, and the factors of foreign exchange settlement and sales at the transaction level.
What does it mean when the RMB exchange rate breaks "7"? The relevant person in charge of the People's Bank of China once said that this "7" is more like the water level of a reservoir. It is higher during the wet season, and it will drop again during the dry season. It is normal to have ups and downs.
Wang Qing, the chief macro analyst of Dongfang Jincheng, believes that the sensitivity of the "7" point has been weakened in recent years, that is, falling below "7" does not mean that it will continue to depreciate sharply in the future; rising above "7" ", nor does it indicate that the renminbi will continue to appreciate sharply.
The lowering of the RMB exchange rate will bring certain benefits to export companies in the short term, but many trading companies will lock in the exchange rate in advance to reduce the risks brought about by market fluctuations, so the impact is not significant. The lowering of the exchange rate also has a limited impact on the "pockets" of ordinary people. In the short term, the exchange rate of RMB against the U.S. dollar may continue to fluctuate slightly around "7", and the annual limit for personal exchange is 50,000 U.S. dollars or the equivalent foreign currency. The income generated by remittance may not be enough to offset the loss of handling fees in the process.
Resolutely curb the sharp fluctuations in the exchange rate
It is worth noting that after the RMB exchange rate fell below the "7" mark, the People's Bank of China and the State Administration of Foreign Exchange sent signals to the market. The first meeting of the China Foreign Exchange Market Steering Committee in 2023 was recently held in Beijing. The People's Bank of China and the State Administration of Foreign Exchange stated that when necessary, they will correct pro-cyclical and unilateral behavior and curb speculation. The member units of the self-regulatory mechanism must consciously maintain the basic stability of the foreign exchange market and resolutely restrain the fluctuations of the exchange rate. After the news of the meeting was released, the RMB exchange rate rebounded significantly, and the onshore and offshore markets rose accordingly.
What is the future trend of RMB exchange rate? Market institutions have given relatively optimistic answers, and returning to within "7" is a high probability event. Zhao Qingming, deputy director of the China Foreign Exchange Investment Research Institute, predicted that the RMB exchange rate will likely return to within "7" in the second half of the year, and is expected to achieve a certain degree of appreciation throughout the year. He believes that my country's economic recovery is in good shape, and its growth rate this year will still be among the fastest among major countries, which constitutes a solid material foundation for the stability of the RMB exchange rate. Moreover, the US dollar exchange rate is currently only rebounding, and the general trend is still dominated by depreciation. Therefore, The room for RMB depreciation is limited. In Wang Qing's view, given the prospect of overseas economic downturn and domestic economic recovery this year, there is no room for a large depreciation of the RMB.
