The RMB exchange rate broke through the 6.34 mark Three major factors supported the appreciation

Reporters Hao Yajuan and Zhang Rongwang reported in Shanghai and Beijing

According to the China Foreign Exchange Trading Center, on January 18, 2022, the onshore yuan rose above the 6.34 mark against the US dollar, the highest since May 2018. It is worth mentioning that the RMB exchange rate once touched 6.3368 intraday.

As for the reasons for the recent increase in the exchange rate of the renminbi against the US dollar, analysts said that the correction of the US dollar index, the export data in December 2021 exceeded expectations, and the settlement of foreign exchange by enterprises before the Spring Festival are the main reasons for the appreciation of the renminbi in this round.

In terms of the US dollar index, the jump and depreciation of the US dollar index has a certain stretching effect on the RMB exchange rate. The CITIC Securities team pointed out that the December 2021 Fed interest rate meeting announced the acceleration of Tape and the removal of inflation "temporary", while the dot plot of the policy rate forecast shows that all members are expected to raise interest rates in 2022, and 12 members believe that there will be at least three rate hikes in 2022. Under the overall "eagle" argument, the dollar index once approached 97 and then fell back. Then, on December 16, 2021, the ECB left the three key interest rates unchanged and the Bank of England raised the benchmark rate by 15 basis points to 0.25% more than expected, the dollar index continued to decline, and fell to 95.88 at one point. But with "hawkish" remarks by multiple Fed officials on December 17, the dollar index rebounded above 96.5. Looking forward to the future, the game of interest rate hike expectations will dominate the trend of the dollar index, and as the Expectation of the Fed's interest rate hike in 2022 becomes stronger, the dollar index may continue to run strongly.

The high export boom also provides support for the appreciation of the renminbi. On January 14, the General Administration of Customs released the foreign trade data for the whole year of 2021 and December. In US dollar terms, in December 2021, the year-on-year growth rate of exports fell slightly to 20.9%, the year-on-year growth rate of imports fell to 19.5%, the trade surplus expanded to 94.46 billion US dollars, a new single-month surplus value; in 2021, the scale of foreign trade exceeded 6 trillion US dollars for the first time in history.

"Seasonal foreign exchange settlement factors will also play a key role in the recent strength of the RMB exchange rate." Ping An Securities' research team mentioned that although the trade surplus brings foreign exchange income to enterprises, enterprises may not immediately settle foreign exchange into RMB. Generally speaking, from the end of each year to the Spring Festival of the following year, enterprises are more willing to settle foreign exchange, and the high increase in trade surplus in 2021 has also increased the amount of foreign exchange that enterprises can settle. Historically, the year-on-year correlation between bank settlement on behalf of customers and the RMB exchange rate, the peak of foreign exchange settlement at the end of 2021 is stronger than that of the same period last year, which has become an important force driving the appreciation of the RMB exchange rate at the end of the year.

A banker also pointed out that due to the continuous higher-than-expected chinese exports and the support of corporate foreign exchange settlements, the renminbi continued to appreciate.

The Mingming team of CITIC Securities pointed out that from the perspective of the mid-price formation mechanism of the RMB-USD exchange rate, that is, the "closing price + a basket of currency exchange rate changes", the demand for settlement of foreign exchange after the Spring Festival has declined, the impact of "foreign exchange market supply and demand" on the RMB exchange rate has weakened, the impact of the corresponding US dollar index on the RMB exchange rate may gradually return, and the RMB may face a contest between the current account surplus and the strong US dollar index after the holiday; follow-up, the mainland's export growth rate or the risk of falling in the second half of the year. Settlement and sale of foreign exchange or return to balance, the impact of the US dollar index on the RMB exchange rate may return to domination.

On January 18, 2022, Sun Guofeng, director of the Monetary Policy Department of Chinese Bank, said at the 2021 financial statistics press conference that the trend of the RMB exchange rate is affected by many factors such as market supply and demand, international market trends, etc. Market supply and demand play a decisive role in the formation of the RMB exchange rate, and the changes in the RMB exchange rate are mainly determined by the market, which may appreciate or depreciate, enhance flexibility, and fluctuate in both directions.

Looking forward to the trend of the RMB exchange rate in 2022, the research team of Ping An Securities believes that the weakening of the balance of payments support for the RMB exchange rate will make the correlation between the RMB exchange rate and the US dollar index strengthen again, and the US dollar index in 2022 is still supported by the US economic recovery and the Fed's interest rate hike, thus bringing some pressure to the RMB exchange rate. As of December 31, 2021, the dollar index has rebounded back to 95.97, and since the 2015 "8.11" exchange rate, when the dollar index is in this position, the dollar-yuan exchange rate is in the range of 6.65 to 7. Subsequently, if the balance of payments support weakens, the dollar/yuan exchange rate may move towards this range.

Lian Ping, chief economist of Zhixin Investment Research Institute, said that in 2022, the exchange rate of the renminbi against the US dollar may show two-way fluctuations and wide oscillations between 6.2 and 6.7. He analyzed that the tone of the mainland's monetary policy is stable, and under the tone of steady growth at the Central Economic Work Conference, a number of policies in early 2022 are good for the fundamentals of the domestic economy, which will support the resilience of the renminbi. However, a series of factors will exert depreciation pressure on the renminbi, especially when the Us Reserve accelerates the tightening of monetary policy, the dollar index is strong, and the renminbi may return to a situation of reverse resonance with the dollar index.

(Editor: Zhu Ziyun Proofreader: Peng Yufeng)