Offshore USD/RMB Exchange Rate Breaks 7.25 Again: Factors Influencing Short-Term Exchange Rate
On August 11, the offshore USD/RMB exchange rate once again surpassed the 7.25 mark. Analysts speculate that multiple factors are contributing to the short-term pressure on the RMB exchange rate. However, as the Federal Reserve’s interest rate hike cycle comes to an end and the effectiveness of domestic positive policies becomes evident, there are indications that the RMB exchange rate will rebound and stabilize under the comprehensive efforts to stabilize the exchange rate policy.
Influence of the Dollar: Rebounding Dollar Index Increases RMB Exchange Rate Pressure
Fan Ruoying, a researcher at the Bank of China Research Institute, explains that recent depreciation of the RMB exchange rate is influenced by various factors both globally and domestically. From an international perspective, Fitch downgraded the US sovereign credit rating and Moody’s downgraded ratings of several US banks. This has sparked short-term risk aversion in the global financial market, leading to a surge in the US dollar index.
On the domestic front, China’s export value in July experienced a 14.5% year-on-year decline, intensifying the pressure on RMB depreciation. With the need for further improvement in China’s economic growth momentum and the uncertainty surrounding the Federal Reserve’s monetary policy, the RMB is expected to face continued volatility and short-term depreciation pressures.
Medium and Long Term Outlook: Stabilization and Rebound Expected for RMB Exchange Rate
Looking ahead, Zhou Ji, a senior macro-foreign exchange analyst at Nanhua Research Institute, believes that the momentum for the US dollar to break through previous highs is insufficient. The short-term exchange rate between the US dollar and the RMB is projected to remain in the range of 7.30, or potentially reach a bottom. This indicates that the RMB exchange rate will likely maintain a consolidation trend in the near future.
Key factors influencing the future trend of the RMB exchange rate include the extent of domestic economic recovery, the reversal of interest rate differentials between China and the United States, the impact of the US dollar trend, and currency market expectations, according to Che Meichao, a foreign exchange analyst at Yide Futures.
With the implementation of measures to stabilize the economy and signs of limited deterioration in the RMB exchange rate, experts anticipate stabilization and appreciation in the long term. Additionally, as the Federal Reserve reaches the end of its monetary tightening cycle, the US dollar index is expected to decrease from its current high levels. These factors, combined with ongoing domestic growth stabilization policies, will enhance support for the RMB’s future appreciation.
Despite expectations for fluctuation in the short term due to fundamental differences, monetary policies, and the balance of payments between China and the US, experts predict a high probability of RMB appreciation in the fourth quarter. As China opens up more policy space and implements relevant measures, its advantages will become increasingly apparent. Furthermore, the expected contraction of US bank credit and the confirmation of a halt to monetary policy tightening further support projections of RMB appreciation in the coming months.
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On August 11, the offshore USD/RMB exchange rate broke through the 7.25 mark again. Market participants said that under the combined influence of multiple factors, the RMB exchange rate is under pressure in the short term, However, as the Fed’s interest rate hike cycle comes to an end, the effectiveness of domestic positive policies is coming to an end gradually evident, and the comprehensive efforts to stabilize the exchange rate policy Under the combined effect of internal and external factors, the RMB exchange rate is expected to rebound the shock.
DollarThe index rebounded from a low level, making theRMBexchange rate pressure
Fan Ruoying, a researcher at the Bank of China Research Institute, told Shell Finance that the recent depreciation of the RMB exchange rate is affected by multiple factors at home and abroad. From an overseas perspective, Fitch downgraded the US sovereign credit rating, and Moody’s downgraded the ratings of several US banks. Short-term risk aversion in the global financial market has heated up, leading to a rebound in the US dollar index. .
From a domestic perspective, my country’s export value in July fell 14.5% year-on-year, and the weaker-than-expected exports increased the pressure of RMB depreciation. Considering that the momentum of my country’s economic growth needs to be further improved, there is still great uncertainty in the Federal Reserve’s monetary policy, and the spillover effect of foreign risks is still relatively large. It is expected that the RMB will be in a state of volatility with a high probability, and it will still face certain depreciation pressures in the short term.
Che Meichao, a foreign exchange analyst at Yide Futures, told a Shell Finance reporter that the recent performance of US big data has eased market concerns about an economic recession. In addition, Moody’s downgraded the ratings of more than 10 banks in the United States. The risk aversion boosted the dollar index to rebound, and the Bank of Japan maintained an easing policy to put pressure on the Yen. the dollar index creates external pressure.
Second, the trade data released domestically this week shows that the pressure of external demand has increased, which is not conducive to foreign exchange settlement and weakens the support for the RMB The market has expectations continued depreciation and more foreign exchange purchases. In addition, the continued outflow of funds northwards this week and the lack of market confidence are also putting pressure on the RMB. It is worth noting that the central price published by the foreign exchange trading center has continuously released stability maintenance signals recently, leading the market price to move closer to the central price However, the pressure is not has been fully released again, and the probability of maintaining a high range in the short term is relatively high.
Medium and long termThe RMB exchange rate is expected to stabilize and rebound
Zhou Ji, senior macro-foreign exchange analyst at Nanhua Research Institute, said that looking forward to the market outlook, the momentum of the US dollar to break through the previous high is not sufficient, and is expected to remain in the range of 99 – 103 in the short term. The exchange rate of the US dollar against the RMB is around 7.30 or the bottom of the current stage, and the RMB exchange rate is expected to continue to maintain a consolidation trend in the short term.
Che Meichao pointed out that the main factors affecting the trend of the RMB exchange rate in the next stage include the degree of domestic economic recovery, the reversal of interest rate differences between China and the United States, the impact of the trend of the US dollar , and currency market expectations.
He further noted that the recently published US inflation rebounded in July. Fortunately, it was lower than expected and that core inflation continued to slow, but given that there is room for a further rebound in food and energy prices the Fed can be extended to maintain high interest rates. At the same time, it is not ruled out that there could be another increase in the rate during the year.
On the domestic front, although measures to stabilize the economy have been introduced one after the other, the short-term economy is still in a state of weak recovery, There are still expectations for RRR cuts and interest rate cuts in the second half of the year. The expected difference in monetary policy between China and the US is still putting pressure on the RMB, but the cycle of monetary policy tightening in the US As the end comes to an end, the marginal effect of the spillover effect is weakened, and the pressure on RMB depreciation is expected to be limited. With the further implementation of the domestic economic stabilization policy, the market remains optimistic about the trend of the RMB exchange rate as a whole.
Fan Ruoying believes that the RMB is expected to stabilize and rise in the long term. Recently, the government has paid more attention to the stability of the exchange rate, and has repeatedly released positive signals to stabilize the exchange rate. It is expected that the further deterioration of the RMB exchange rate is limited. At the same time, the Fed is already at the end of the monetary tightening cycle, and the US dollar index will likely fall back from high levels in the future. With the continued progress of the domestic growth stabilization policy, my country’s economic prosperity is expected to rise in the future, and the support for the future appreciation of the RMB will be strengthened.
Li Chao’s macroeconomic team from Zheshang Securities believes that the RMB exchange rate is expected to fluctuate in the third quarter. The trend of the exchange rate of the RMB against the US dollar is affected by factors such as the differences in the economic fundamentals of the two countries, the monetary policies, and the balance of payments. At present, the “policy bottom” of my country’s economy is relatively clear , but the US short-term job market has strong resilience and core inflation is weak High, the Fed will make optional follow-up decisions, and the September interest rate meeting decisions are still relatively volatile. The future trend of the RMB exchange rate still needs to pay attention to the Fed’s tone disturbance, and is expected to remain volatile in the short term.
The team expects that there is a high probability that the RMB exchange rate will appreciate in the fourth quarter. It is expected that with the opening of domestic free policy space and the gradual implementation of relevant measures, the advantages of my country will gradually become apparent. In addition, US bank credit contraction is expected to strengthen in the second half of the year, and the expectation that monetary policy will stop tightening will continue to be confirmed. In general, it is expected that in the fourth quarter, my country will be relatively leading in terms of fundamental expectations and monetary policy, which will promote the appreciation of the RMB exchange rate.
Beijing News Shell Finance reporter Zhang Xiaochong
Editor Song Yuting
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