The Renminbi Was Hit By A Blow, And The Pressure On The Overall Devaluation Of The Position Was Weakened.

Since the end of May, the offshore and offshore renminbi has continued to jump against the US dollar.

In June 5th, the central parity of the RMB against the US dollar increased by 135 basis points to 6.7935, refreshing the new high since last November 10th and returning to the 6.7 era.

The trigger factor for the continuous rise of RMB is, in the final analysis, the introduction of the counter cyclical adjustment factor in the middle price quotation model, which boosted market confidence.

With the weakening of the US dollar, we can effectively rectify the RMB exchange rate and make the RMB exchange rate rise.

In addition, the improvement of China's balance of payments structure and favorable economic data are also the fundamental support for this strong exchange rate.

However, it remains to be seen whether the strong trend of the renminbi against the US dollar will continue.

First, this time

To a large extent, it also benefited from the tightening of liquidity in offshore markets, thereby lifting the offshore renminbi Hongkong interbank offered rate (Hibor).

From May 25th onwards, overnight Hibor began to go up rapidly, and in June 1st it soared to 42.81%. The cost of shorting the renminbi was greatly increased, and the short positions of the RMB were hit and settled, which greatly contributed to the appreciation of the offshore RMB exchange rate.

In June 2nd, overnight Hibor began to return to normal, sharply down to 8.6755%, easing the liquidity tensions of offshore RMB, reappearing the depreciation trend against the US dollar exchange rate, and narrowing the offshore and offshore exchange remittance.

This may indicate that the goal of rectifying the RMB exchange rate is to be achieved, and the rise of offshore Hibor can stimulate the appreciation of the renminbi in the short term, but it can not change the long-term trend. Tightening offshore capital liquidity has limited impact on the RMB exchange rate rise.

The addition of counter cyclical factors can weaken the decisive role of closing price and a basket of currencies to the middle price. When the US dollar index has dropped considerably, it will moderate the cyclical fluctuation of market sentiment, enhance the initiative of exchange rate stability, and make the RMB exchange rate trend more accurately reflect the changes of economic fundamentals.

Counter cyclical factor

According to the judgement of macroeconomic and foreign exchange market, each quotation bank will set itself automatically. It is evident that the premise of the countercyclical factor's influence is the correct model parameters.

Since parameter selection and model setting have great uncertainty, the practice of how to counter cyclical factors remains to be seen.

In addition, the addition of counter cyclical factors is an external force intervention. Such a non market force will also disturb the market's expectation of RMB to a certain extent, and whether the countercyclical factor can be accepted by the market and whether it can achieve the desired effect continuously is also uncertain.

In the long run, the basic factors such as the interest rate level, inflation level, fiscal policy, monetary policy and other basic factors are the fundamental reasons for the leading exchange rate changes.

Considering the continued weakness of the US dollar index, the US non farm employment report in May was not satisfactory. The economic fundamentals data restricted the recovery of the US dollar index and supported the appreciation of the RMB exchange rate.

But at the same time, in the middle of June, the Fed's high probability of raising interest rates will also restrict the decline of the US dollar index, thereby inhibiting the appreciation of the RMB against the US dollar.

Overall, the RMB pair

It remains to be seen how long the middle price will remain in the 6.7 era and whether the renminbi will continue to rise.

But even if the US Federal Reserve chose to raise interest rates in June, the US dollar index continued to rise steadily. The appreciation of the current exchange rate has greatly weakened the overall depreciation pressure of the RMB.

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