The yuan fell below 7.32 again? Not a bad sign!

The RMB fell below 7.32! It's just one step away from last year's low of 7.37! The exchange rate has plummeted, and everyone's money bags are going to be damaged!

In the past two days, have you often seen this kind of whistle, saying that the renminbi is going to depreciate, ostensibly because the central bank accidentally lowered the MLF interest rate, but in fact, the economy is not working and has begun to sing about the economy.

Indeed, the depreciation of the renminbi is true. At the beginning of this year, the exchange rate of the renminbi against the US dollar was around 6.8:1, and today it has reached 7.3:1 US dollars. Even yesterday, it fell below 7.32, continuing to hit a new low since November last year. It can also be said that the renminbi depreciated by 7.3%.

But can "absolute exchange rate values" really be used directly as indicators of economic quality or badness? Does currency depreciation represent a recession?

A more common saying is that the offshore yuan against the US dollar data, on the one hand, is to see whether the dollar is strong or not, on the other hand, to see how our economy is. If the offshore RMB exchange rate has fallen like this, it is not that the economy is not working.

Let's take a look first, what is the reason for this round of offshore RMB exchange rate?

First, it's now the Fed's rate hike cycle, and we've just completed a full rate cut. We studied politics in high school, interest rates are lowered, currencies are depreciating, people are raising interest rates, we are lowering interest rates, do you say this exchange rate pressure will not increase?

This is the main reason why the renminbi exchange rate has fallen from 6.3 to 7.3 over the past year. The Fed raised interest rates, and we cut interest rates, and the interest rate spread widened, which led to some hot money outflows.

Of course, there are many other reasons, such as the weakness of recently released trade, financial and other data, which has dampened the performance of the exchange rate. But these are not the main reasons, so some people like to use the depreciation of the exchange rate to sing about the decline of the economy, which is really a bit far-fetched.

Because under this cycle of crazy interest rate hikes in the United States, the exchange rates of countries this year are determined more by monetary policy than by economic conditions.

It goes without saying how bad Europe's economy is this year. The European manufacturing PMI fell 47.2% in July, a three-year low, and even Germany, the engine of the European economy, fell below 40. Europe's composite PMI has also fallen to the point of prosperity and decline, and it is estimated that even the PMI of the service sector will begin to decline this month.

In this context, the euro performed exceptionally strongly, appreciating by 14% in half a year. Why? Since July, the ECB has raised interest rates nine times in a row, which can be said to be following the Fed's footsteps. It is precisely because of this that they have no pressure on the exchange rate to depreciate.

Let's look at another country in the world that has not followed the United States in raising interest rates - Japan. From around 130 at the beginning of the year to 145 recently, the depreciation has exceeded 11%, even greater than ours.

Now everyone should believe that this year, the impact on the exchange rate is that monetary policy is greater than the state of the economy.

Therefore, the appreciation of currencies such as the euro can be said to be based on poor economic conditions. If we follow the Fed in raising interest rates, the renminbi will only look better than the euro, but the economy will only be worse.

At present, our real estate and consumption can not be stimulated by releasing water in every possible way, and raising interest rates at this time will only detonate more thunder. That's why we will adjust counter-cyclically and stabilize the economy. The price paid is the depreciation of the exchange rate.

But think about it, how to choose a good exchange rate and a more stable economy? I think anyone would choose the latter.