The Yen Continues To Depreciate Under The Efforts Of The Boj.

A year ago, there was a popular strategy: borrowing cheap yen and doing more Renminbi in the long run. This trading strategy is not only safe but also profitable. And can this arbitrage deal work as the market changes?

The prevalence of this arbitrage strategy is based on two points, one is the long-term appreciation trend of RMB. The Chinese government has acquiesced in a steady appreciation of the renminbi since the reform in 2005. The yuan has risen by 35%. On the other hand, the yen has been depreciating under the efforts of the Bank of Japan.

Since the beginning of this year, there has been a sharp shock in the foreign exchange market, especially in emerging market currencies. The Indonesian rupiah recently fell to a 16 year low. The Russian Ruble depreciated by 70%. Even the currencies of India and Turkey, which benefited from the sharp drop in oil prices, began to decline. To avoid too much appreciation of the yen, South Korea has cut interest rates for the two time since August.

Many analysts believe that China will take the same measures to guide the depreciation of the renminbi. This spring, the renminbi did drop for a long time, with a total decline of 3%.

But Goldman Sachs believes that compared with other emerging market countries, the yuan is still a relatively strong currency "fortress", the trade weighted exchange rate, the rise of the renminbi is obvious.

Yi Gang, vice president of the Central Bank of China, also mentioned this month that the US dollar was the strongest this year, and the US dollar appreciated more than 10% against the euro. appreciation More than 11%. The renminbi is the second strongest in the world, and the real effective exchange rate represents appreciation.

The British interpretation is: This is the first time the Central Bank of China has publicly warned that the yuan is too strong, which means that China may change its exchange rate policy in the face of deflation and haze and the general depreciation of Asian currencies.

Though many analysts think the future RMB There is a greater risk of devaluation, but a British commentary said that China now does not need to rely on cheap money to support economic prosperity.

Although China's economy is slowing down, its base is very large. Given China's large population, the authorities can start to abandon their low value added and export led. Growth pattern To a certain extent, this way is caused by huge economic volume and currency depreciation.

Moreover, slower growth does not mean a decline in quality of growth, and sometimes the opposite is true. China is moving cautiously toward the domestic consumption driven mode, while avoiding the old path of heavily relying on investment, destroying the environment and resources. In recent years, China's domestic consumption has contributed more than its investment to the economy for the first time. In the process of transformation, China is also allowing higher wages.

A healthy domestic market will be transformed into a potential new growth pole, which will lead China to a new and more competitive development track. Low physical capital and increasingly high-quality human capital will bring about all kinds of innovations, and may even revitalize the development of high-end manufacturing. At present, developed countries are taking the lead in data mining, 3D printing, medicine and other fields. China will gradually challenge these areas. The rise of China Mobile's Internet industry is an example.

At the same time, Japan's cheap currency means that its manufacturers do not have much pressure to improve and abandon their original models. The path of promoting Japan's prosperity since World War II is actually using domestic market to support overseas sales.