RMB Appreciation Pressure Released To Usher In A Phased Appreciation

Cheng Jilian's recent rise in the RMB exchange rate on the shore and offshore markets continued to stabilize the RMB against the US dollar in the offshore and offshore markets yesterday at around 6.51.

China's economic and financial data are coming out in succession this week, and the market is expected to have a certain impact on the RMB exchange rate trend. At present, the overall expectation of the RMB devaluation pressure has been basically released, the RMB or the ushered phase of appreciation.

RMB or stage appreciation

The latest trade surplus is the highest in history, and market participants believe that there is a large probability of RMB appreciation against the US dollar.

From the end of 2015 to the beginning of 2016, short selling of RMB was the mainstream of the market.

In February 2016, with the central bank's intention to maintain stability and the market's pessimistic expectations of the US economy, the market's attitude towards the renminbi changed dramatically.

Market participants believe that with the huge trade surplus to start selling foreign exchange, the renminbi is expected to stage appreciation against the US dollar.

Zhou Xiaochuan, the governor of the central bank, recently declared that "the renminbi does not have the basis of sustained depreciation" and "will not let the speculative forces over dominate the market sentiment".

"Establishing a market image of words and deeds will help the central bank's expected management. This also means that the renminbi will remain stable for some time to come."

A bank official said.

However, there are also points of view that the exchange rate should be adjusted in reference to a basket of currencies.

Next, we cannot simply judge the strength of the RMB's depreciation expectations from the rise and fall of spot exchange rates.

In the onshore market, the central parity of RMB against the US dollar was 16 daily at 6.5130, a slight decrease of 12 basis points from the previous trading day.

The spot exchange rate of RMB against the US dollar has been hovering around 6.494 an earlier day and night trading. At 23 on the evening of 15, it was reported at 6.4948.

The spot reference rate of RMB against the US dollar has been stabilized at 6.51 front-line market on the shore yesterday, closing at 16:30 at 6.5136.

On the offshore market, the spot exchange rate of the RMB against the US dollar was basically stable at 6.4970, basically unchanged from the closing price of 6.4968 a day earlier. In the early morning, the offshore spot was near 6.50, and after noon, the offshore spot exchange rate was near 6.51, and it was still around 6.517 in the late market.

The rising trend of offshore renminbi has led to continuous activity in RMB derivatives trading. The US dollar / RMB futures contract of Hongkong trading and clearing house has recorded more than 6000 pactions in four consecutive trading days last week.

This week, China's macroeconomic and financial data have been released. With the already released data warming up, the market's expectations for the central bank's drop in the market rose again yesterday.

With the weakening of the US dollar, the devaluation pressure of RMB has been released, and the central bank's attention to the market has also been strengthened.

At this point, the central bank can consider lowering the deposit rate to release the accumulated pressure and prepare for future market turmoil.

Financial data released yesterday showed that China's new RMB loans increased to a record high of 2 trillion and 500 billion yuan in January 2016, up from 1 trillion and 470 billion yuan in January and 5978 trillion yuan last month.

In addition, the foreign exchange reserve data released in February 7th showed that foreign reserves decreased by 99 billion US dollars in January, and Liu Ligang, chief economist of Australia New China bank, said that this means capital outflow.

As capital continues to flow, Liu Ligang believes that the central bank needs to reduce the deposit reserve ratio to inject liquidity into the market.

"The financing cost of the economy is still at a high level, especially for small and medium-sized enterprises.

To maintain its earlier expectations, the central bank will see a 50 basis point reduction in the first quarter, which will inject about 650 billion yuan into the market.

Liu Ligang said.