Tan Yaling: Three thoughts on the possibility of the renminbi this year

Tan Yaling: Three thoughts on the possibility of the renminbi this year

The biggest difference in the variables of the RMB market this year is that the depreciation between 7 yuan is too long, which adds great difficulty to the judgment of the impact of the whole year and the whole cycle, and the RMB trend expectations, stage rhythm and range volatility are further increasing the uncertainty possibility, especially the risk of RMB depreciation based on offshore external forces is the focus, which is a special stage and cycle inertia that the mainland's economic competitiveness is suppressed, and the depreciation of RMB is difficult to avoid or even deepen.

Looking back at the long cycle since the RMB exchange rate reform in 2005, the RMB is currently in a clear depreciation cycle with regular characteristics. At present, the biggest difficulty lies in the 2017-2021 Sino-US trade competition period and the special period of the epidemic, and the key is to disrupt the market to disrupt the RMB depreciation cycle. Therefore, the current confusion in reasoning about the RMB depreciation cycle lies in the difficulty and separation of the special period of long-term judgment, and it is also the focus of confusion. If the onshore RMB depreciation cycle excludes the abnormal five-year period from 2017 to 2021, the RMB depreciation cycle has been the sixth year since its start in 2014.

However, the biggest difficulty at present is that the RMB has been breaking 7 for 9 months since May 18, 2023, which makes the prediction of the RMB cycle and stage 7 yuan level this year the key and the biggest difficulty. After all, the onshore yuan opened at 7.1096 yuan on January 2 this year, and the offshore yuan opened at 7.1233 yuan on January 1, which is an unpredictable focus on the challenge and assessment of the closing price of the yuan at the end of the year. In particular, the interference of RMB cyclical factors is mainly caused by the external, and the expected outlook is accompanied by possible changes or adjustments in the external environment, and it is expected that the RMB market in 2024 may still be mainly depreciated, and the trend of RMB at the beginning of the year may be 7.15 yuan as the axis, which is an important parameter for consideration compared with the beginning of the year, and it is also an important parameter for this level to be in line with the basic point of domestic and foreign exchange rate competition, especially for the global economic ranking dominated by external dollar denomination, which is also a key year and an important step for Sino-US competition to suppress the mainland economy.

It is expected that the probability of RMB depreciation in 2024 is high, but the possibility of RMB appreciation year cannot be ruled out, which lies in the interference of the extreme depreciation of RMB since the beginning of 2024 and seriously impacting the judgment position of the annual cycle law and the consideration of the exchange rate level.

The second possibility: there is room for extreme depreciation in the medium-term rhythm. Referring to the medium-term rhythm of the RMB in the past four years (2020-2023), it is expected that the extreme depreciation of the RMB this year will further exceed the level of last year, and the extreme depreciation of the RMB is expected to be 7.4-7.5 yuan. According to the current RMB market, this is more likely, especially the offshore extreme depreciation strategy or the deepening of the RMB depreciation during the year. In contrast, the concept of time may be advanced to the law of September in previous years, and the depreciation of the RMB deepened in July-August, which may be worth paying attention to. This may coincide with the repair of the US dollar appreciation in the US fiscal cycle, because the US election year will also change the rhythm and stage adjustment of the US dollar trend, and the time for the US dollar depreciation appeal and appreciation moderation is likely to rise in July and August.

In 2022-2023, the extreme appreciation of the US dollar is around September, and the extreme appreciation of the US dollar this year may be advanced to July-August. After all, the U.S. economic cycle, the U.S. stock bull market cycle, and the interest rate cycle are all sensitive points for the U.S. dollar to appreciate. As a result, the extreme depreciation logic of RMB with the appreciation of the US dollar is predictable, and the rhythm of RMB and the logic of the US dollar are still the dominant market, and the anti-correlation is the basic law. Therefore, the basic rhythm of the RMB this year is six fluctuation stages: depreciation, appreciation, depreciation, extreme depreciation, bilateral fluctuations, and slight depreciation, during which the speed and intensity of RMB appreciation will be the parameters and key to the stimulation of RMB depreciation.

This is a more complex and changeable situation with the three bands of RMB appreciation, depreciation and appreciation in the past two years, and the medium-term rhythm of the RMB is an important reference for the triple combination of maneuvering, roundabout and coordination, and acting randomly or opportunistically. From the perspective of the current time, the author predicts the medium-term rhythm of the RMB, and the follow-up and repair of the future market performance will be very important steps and follow-up considerations.

The third possibility: short-term market and range-bound volatility will intensify again. At present, the short-term market is full of passive constraints, and the extreme depreciation of offshore RMB is the main weather vane and the focus of countermeasures, but the central price parameters of the mainland central bank of onshore RMB are very severely disturbed, and the competitive exchange rate is a helpless situation and a last resort for the short-term RMB market. In particular, the interest rate differential between China and the United States is getting wider and wider, and the market is emotionally speculative, the transfer of capital investment, and the currency-specific exchange rate contest is not conducive to the true embodiment of the renminbi, on the contrary, the psychological impact on the mainland's economic confidence and the international market will increase, and it will be difficult to avoid the increase, acceleration and widening of the exchange rate shock.

In particular, the external environment and sentiment use asymmetric factors such as the mainland stock market, the two sessions, and interest rate cuts to manipulate the RMB market, which is worthy of vigilance. In addition, looking back at the amplitude of RMB fluctuations in recent years, the amplitude of RMB last year was only less than 6,500 points, which is a bit abnormal compared with the RMB volatility of 10,200 points in 2022. It is expected that the U.S. dollar index will have a range of 97-108 points and 1100 points for the whole year, and it is inevitable that the amplitude of the RMB will increase correspondingly to the US dollar. Compared with the US dollar index in 2022, the amplitude of 114-94 points and 2,000 points is the key reference value for the fluctuation of the RMB range of about 10,000 points, and the RMB market is 6.3 yuan to 7.32 yuan.

As a result, it is expected that the US dollar will rise and fall this year and the Federal Reserve will raise interest rates and cut interest rates, on the contrary, the RMB interest rate cut will make the RMB passively subject to the amplification of fluctuations is inevitable, market speculation and speculation and international competition benchmark currency depreciation expansion and amplitude increase are speculative strategies and competition focus. It is expected that the range of RMB this year will show the possibility of between 6.6-7.6 yuan, especially the market should pay attention to the focus on the US election and the end of the 14th Five-Year Plan of the mainland, and the inverse and competitive political and economic focus of the two countries will be a practical problem that the RMB shortcomings cannot face at present.

After all, the non-convertibility of the RMB, the unopened pattern of the foreign exchange market and the acceleration of the opening of the capital market have made the external environment more complicated and stimulated the risk of RMB volatility, and the depreciation and volatility of the RMB will be the most important risk in 2024. Compared with the deepening trade competition between China and the United States, it is at a critical time, and suppressing the mainland's economic strength and credit bottom line by means of RMB depreciation will be the most important and critical period that the mainland must face.

The above is my assessment of the current situation, and in the future, the trend tracking, evaluation correction and random adjustment of the RMB will face an unprecedented period, and rational, scientific and professional cognitive expectations will be crucial. The above comments are limited to time, level and comparative arguments, which do not represent a trend conclusion or a phased level, and the complexity of the renminbi requires a high degree of vigilance as never before.

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