RMB exchange rate, swaps, options
Market review: In April 2024, the divergence of the US eagle and European pigeons became clear, and the US dollar exchange rate interest rate rose. Technology stocks led the decline in U.S. stocks, geopolitical risks in the Middle East heated up, and global risk appetite retreated. The Japanese yen and South Korean won led the decline in Asian currencies, and Japan, South Korea and the United States issued a joint statement. USD/CNY rose modestly, and the RMB index rebounded. Onshore and offshore RMB interest rate differentials and swap spreads have widened significantly.
Outlook: Spot rate: The closing and mid-parity of USD/RMB will continue to maintain a "delicate balance". The closing price will move upwards with a gentle slope, while the mid-price will converge towards the closing price. Derivatives: The spread between onshore and offshore swaps is expected to remain in the high range as strong demand for the US dollar dominates the onshore swap market and offshore CNH Hibor remains high to adjust RMB expectations. At present, the onshore and offshore swap spread has maintained the highest level in history in the past five years, and we are concerned about its sustainability and impact on the spot exchange rate.
Strategy recommendation: Please refer to the text for details of specific hedging strategies and points.
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