Two major factors support the stability of the exchange rate The RMB is expected to be relaxed

Securities Times reporter Sun Lulu

Entering October, the exchange rate of the renminbi against the US dollar was "silent" for several months and ushered in a wave of rally. At present, it has risen above the 6.40 mark to reach around 6.38, and the appreciation rate in the past 20 trading days is about 1.2%. This round of rapid appreciation of the renminbi came somewhat suddenly, especially on October 19, the domestic and foreign renminbi exchange rate against the US dollar jumped sharply by more than 0.75%, and some analysts believe that arbitrage capital is boosting.

Whatever the reason, as the RMB exchange rate becomes more market-oriented, the fluctuations of the exchange rate in the short term are affected by a variety of factors. In the short term, the factors affecting the fluctuations of the RMB exchange rate include the scale of foreign exchange settlement and sales in the foreign exchange market, the change of the Fed's policy to the nearby dollar index, etc. Among them, the latter is more concerned by the current market. The dollar appreciated significantly during the Fed's monetary policy tightening cycle, which began in early 2014, had a major impact on emerging market economies. As the Fed starts to reduce its bond purchases before the end of the year, the market will also worry about whether the financial market will stage the previous "ups and downs" after the Fed's monetary policy restarts the tightening cycle. From 2015 to the beginning of 2017, China's foreign exchange market has also suffered a greater impact, accompanied by capital outflows and a decline in the scale of foreign exchange reserves while the RMB has depreciated.

With past operational experience, the Fed has paid more attention to guiding market expectations as early as possible. The market has fully expected the start of bond purchases before the end of the year and the possible interest rate hike in the second half of next year. For China's foreign exchange market, today is different from the past, and there are two significant changes that correspond to the formation of greater support for this round of Fed policy shift: First, the flexibility of the RMB exchange rate has been enhanced, and it can better play its role in autonomous adjustment. In recent years, the RMB exchange rate formation mechanism has been continuously improved, the flexibility of two-way fluctuation of the exchange rate has been enhanced, and the relevant indicators of the foreign exchange option market also reflect that the current exchange rate is expected to be relatively stable. Second, with the steady and orderly opening of China's financial market, China's foreign debt inflow is mainly based on foreign long-term investors investing in RMB bonds, with high stability, and the main indicators to measure the risk of foreign debt are significantly better than the previous round of tightening cycle.

It is with the support of the above favorable factors that the official performance of the jump in the RMB exchange rate since October is also relatively "calm". Recently, in many public occasions, the appreciation of the RMB exchange rate is "a normal performance driven by market forces" and "there is no implied appreciation expectation and depreciation expectation in the current foreign exchange market", which means that it is necessary to continue to play the role of independent adjustment of the exchange rate. Looking forward to the exchange rate market before the end of the year, the exchange rate of the renminbi against the US dollar is expected to fluctuate in a narrow range around 6.40 and will not continue to appreciate unilaterally or depreciate unilaterally.