The RMB exchange rate has risen by over 700 points, and the central bank is shouting, "Take action when it's time."
According to the official website of the People's Bank of China, a special meeting on the self-discipline mechanism of the national foreign exchange market was held in Beijing on September 11th. The meeting discussed the recent situation in the foreign exchange market and the issue of the RMB exchange rate, emphasizing that although the RMB has depreciated against the US dollar recently, it has maintained basic stability against a basket of currencies and relatively strong against non US major currencies. The foreign exchange market is operating steadily, and the overall market expectations are stable.
After the news was released, the offshore RMB against the US dollar exchange rate quickly rose by over 700 points. As of 4:30 pm, the offshore RMB against the US dollar exchange rate had risen to 7.2998, and the onshore RMB against the US dollar was at 7.2895.
This meeting was attended by representatives from the relevant guidance departments of the foreign exchange market self-discipline mechanism and 8 core member institutions of the foreign exchange market self-discipline mechanism. The meeting believes that with the gradual introduction and implementation of domestic policies to stabilize the economy and stabilize expectations, the year-on-year growth rate of prices has bottomed out and turned positive, the import and export data has been better than expected, the effect of real estate policies has gradually become apparent, consumption has significantly rebounded, technological innovation continues to break through, high-quality economic development continues to advance, and the potential for economic progress is accumulating. The basic stability of the RMB exchange rate at a reasonable and balanced level has a solid foundation.
The meeting emphasized that maintaining the basic stability of the RMB exchange rate is a common desire of financial management departments, foreign exchange market self-discipline mechanisms, foreign exchange market members, enterprises, and residents. Under the strong leadership of the Central Committee of the Communist Party of China and the State Council, the financial regulatory authorities have the ability, confidence, and conditions to maintain the basic stability of the RMB exchange rate. When it is necessary to take action, they will resolutely correct unilateral and pro cyclical behavior, deal with behavior that disrupts market order, and prevent the risk of exchange rate overshoot. The self-discipline mechanism of the foreign exchange market should be guided by the financial management department, continuously guiding enterprises and financial institutions to establish the concept of "risk neutrality", and strengthening the supervision and self-discipline management of the behavior of members of the self-discipline mechanism. Foreign exchange market members should consciously maintain market stability, orderly carry out market making and self operated trading, and resolutely eliminate behaviors that disrupt the order of the foreign exchange market, such as speculation and customer incitement. Enterprises and residents should adhere to "risk neutrality", not blindly follow the trend, not gamble unilaterally, not gamble on certain positions, and maintain property safety.
Recently, due to significant fluctuations in the RMB exchange rate, it has attracted attention from various sectors in the market. Last Friday, the onshore and offshore RMB/USD exchange rates fell below the 7.34 and 7.36 levels respectively, both hitting new lows for the year.
Market analysis suggests that the fluctuation of the RMB exchange rate in this round is greatly affected by the strengthening of the US dollar index. At the end of August, Federal Reserve Chairman Powell publicly stated that after a significant monetary tightening policy over the past year, although US inflation data has fallen from its peak, it is still too high, and the Federal Reserve still has a long way to go. Subsequently, market expectations for the Federal Reserve's interest rate hike continued to increase, and the US dollar index strengthened.
The rise of the US dollar index has caused depreciation pressure on non US currencies. Except for the Chinese yuan, the exchange rate of the Japanese yen against the US dollar once approached the 150 mark, reaching a new low in 10 months. The central banks of Japan and South Korea have expressed their views on the possibility of intervening in the foreign exchange market.
For the future market, Wang Youxin, a senior researcher at the Bank of China Research Institute, told reporters that the short-term RMB exchange rate will still be in a state of fluctuating adjustment, and overall it will remain basically stable at a reasonable equilibrium level. With the gradual clarification of the Federal Reserve's interest rate hike cycle, the weakening of market speculation enthusiasm, and the gradual manifestation of the effectiveness of domestic macroeconomic policies, the pressure of RMB depreciation at the end of the year is expected to ease.