Summary of January 28, the spot exchange rate of RMB against the US dollar intraday limit line again approaching 2%, which is close to the limit of RMB second time in three trading days. Yesterday, the US dollar against the yuan closed at 6.2475, down 0.07%, the previous day closed at 6.2435. Yesterday, Yang...
On January 28th, the spot exchange rate of the RMB against the US dollar once again approached the 2% down limit, which was the second time that the RMB was close to the limit. Yesterday, the US dollar against the yuan closed at 6.2475, down 0.07%, the previous day closed at 6.2435. Yesterday, the central bank raised the central parity of the yuan by 82 basis points to 6.1282. In the morning session, the spot exchange rate of the RMB hit a minimum of 6.2481, which was the largest drop from the middle price of 1.96%. It once again approached the 2% limit and set a new record.
Some analysts said that the central bank ended the downward adjustment of the central parity of the yuan against the US dollar, which means that the central bank intends to control the decline of the renminbi and reduce unnecessary panic. Although the official intentions are obvious, the spot exchange rate of the RMB has not stopped falling and stabilized. In January 2014, after the renminbi hit a record high of 6.04, it embarked on a reverse depreciation, with a cumulative depreciation of 3.5%.
Dong Dengxin, director of the Institute of Financial Securities of Wuhan University of Science and Technology, said that there are only two fundamental reasons for the depreciation of the RMB exchange rate: First, due to overcapacity in China's heavy chemical industry and real estate bubble, a considerable amount of foreign capital has been drained. Second, China’s capital exports, a large number of enterprises go out, and foreign investment continues to accelerate.
Dong Dengxin also said that once the RMB depreciation effectively breaks through the critical value of 6.25, it may initiate a phase of phased depreciation unless the central bank intervenes.
Some market analysts said that the depreciation of the renminbi has already eliminated the possibility of a recent rate cut. Because rushing to cut interest rates and lowering the quota will inevitably accelerate the depreciation of the renminbi, and arbitrage capital will accelerate its withdrawal. After the depreciation of the renminbi, the central bank’s monetary policy will focus on the number of tools for open market operations and refinancing, rather than price-cutting instruments.
“The depreciation of the renminbi will help further advance the internationalization process in the capital export stage.†Lu Zhengwei, chief economist of Industrial Bank, said that for the internationalization of the renminbi, traders are accustomed to “receiving coins to pay soft coinsâ€. With the trade-driven internationalization phase, the renminbi needs to appreciate. The domestic “One Belt, One Road†strategy means that the internationalization of RMB has entered the stage of capital output in 2015, and debtors are generally more willing to “debt in soft currencyâ€.
For the trend of the RMB in 2015, the Lu political commissar expects that an “N-shaped†will be taken out throughout the year, and the maximum depreciation of the market price will test the level of around 5%.
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