Recently, the RMB exchange rate has fluctuated greatly. Against the background of a stronger dollar, the RMB exchange rate continued to fall, falling below the 6.9 mark, setting a new low since the end of the year. For a time, the market’s pessimistic sentiment towards the RMB exchange rate rose, and the “Breaking 7” discussion resumed. This scene seems to have met. Looking back at the trend of the RMB exchange rate in recent years, it is not difficult to find that the RMB exchange rate is no longer a unilateral trend. The characteristics of two-way fluctuations are becoming more and more obvious, and the exchange rate flexibility is also obviously enhanced.
For example, from the middle and late April of 2018, the RMB exchange rate began to rebound in a round, and by the end of June, it had already fallen all the previous increases. In November, after the renminbi exchange rate was at the 6.9 mark, it ushered in a strong rebound in December and eventually “recovered lost ground”.
If we look calmly from a long-term perspective, the recent fluctuations in the RMB exchange rate have not exceeded the reasonable range. Even if the volatility increases in the short term, the RMB exchange rate does not have a basis for continued substantial depreciation, both in terms of economic fundamentals and foreign exchange supply and demand factors.
At present, the global trade environment is profoundly changing, and the uncertainty is rising. It is easy to cause market sentiment to fluctuate violently, and it will soon be projected on economic variables such as exchange rates. In terms of the recent fluctuations in the RMB exchange rate, the pessimism of the offshore RMB market began to rise rapidly on Monday (May 12) and quickly spread to the onshore market, causing the RMB exchange rate to fall rapidly.
Although the current international financial market is still unstable and there are still many uncertainties, the impact of external factors is a short-term impact on the RMB exchange rate. Therefore, it is not desirable to form a unilateral expectation of the RMB exchange rate trend. In the medium and long term, the trend of the RMB exchange rate still depends on the economic fundamentals.
At present, China's economic fundamentals are good, financial risks are generally controllable, transformation and upgrading are accelerating, the economy enters a stage of high-quality development, the international balance of payments is stable, and cross-border capital flows are basically balanced. Observing the economic data of the first four months of this year, we can find that the RMB exchange rate has strong support from the fundamentals.
In the context of China's stable economic operation and balance of foreign exchange supply and demand, the current and future period of the RMB exchange rate is basically stable at a reasonable and balanced level. From the perspective of supply and demand in the foreign exchange market, in the first quarter, the deficit in bank settlement and sales was significantly narrowed, and the net inflow of cross-border capital in goods trade increased significantly. Both cross-border capital inflows and foreign exchange settlement under direct investment and securities investment increased. In addition, personal settlement and sales exchanges remain stable. The role of the exchange rate "automatic stabilizer" is also increasing. The adaptability and tolerance of the market players to the flexible exchange rate is enhanced, which is conducive to maintaining a basic balance between supply and demand in the foreign exchange market.
More importantly, in recent years, China's exchange rate marketization reform has steadily advanced, and the formation mechanism of the RMB exchange rate has become more market-oriented. China's central bank has sufficient policy instruments in terms of exchange rate and has experienced many times, and has withstood the test of the market many times.
In the future, China's financial market opening will continue to deepen. The degree of openness of domestic bonds and stock markets will continue to increase, and related capital inflows will gradually increase. This can effectively form a hedge against negative factors such as the rise of trade protectionism. What needs to be reiterated is that, as the central bank has repeatedly stressed since last year, China will never use the exchange rate for competitive purposes.
Under the trend of a stable and stable internal and external environment, China's foreign exchange market will remain stable in the future, and the RMB exchange rate has not continued to depreciate significantly. All parties in the market, especially enterprises, should calmly observe and comprehensively judge to avoid large losses caused by temporary market sentiment.
