Zhang Ming and Chen Yinmo: The US dollar index has climbed to a new high, and the market is starting to debate whether the Chinese yuan will fall below7.0Da Guan. What is the most important reason for the depreciation of the RMB against the US dollar this year? How to Go in the Future
Recently, under the influence of Fed Chairman Powell's tough stance at the Jackson Hole meeting, the US dollar index climbed to109of20New year high. Both the EUR/USD exchange rate and the JPY/USD exchange rate have fallen to20The new low since the beginning of the year. Especially when the euro falls below the US dollar exchange rate1than1Affordability has attracted high market attention. Recently, the exchange rate of the Chinese yuan against the US dollar has rapidly depreciated again to6.9Nearby, the market is starting to debate whether the RMB/USD exchange rate will fall below this year7.0Da Guan. 2021From the end of each year to2022year9month2The central parity rate between the Chinese yuan and the US dollar is6.3757Demote to6.8917Overall depreciation8.1%。 in fact,2022Since the beginning of the year, the exchange rate trend of the RMB against the US dollar has shown a characteristic of "consolidation sharp depreciation consolidation sharp depreciation". The exchange rate of the Chinese yuan against the US dollar experienced two sharp depreciations during the year. The first urgent demotion was2022year4month20Solstice5month13On the day, the central parity rate between the Chinese yuan and the US dollar has depreciated6.1%； The second urgent demotion was2022year8month15Solstice9month2On the day, the central parity rate between the Chinese yuan and the US dollar has depreciated2.2%。 In my opinion,2022The most important reason for the depreciation of the Chinese yuan against the US dollar in was the rapid widening of the long-term interest rate gap between China and the United States. Currently, the economic growth rate in the United States is very strong (significantly higher than potential growth rate), while the economic growth rate in China is relatively weak (significantly lower than potential growth rate). In this context, the Federal Reserve has implemented an accelerated tightening of monetary policy, such as from reducing the amount and scale to continuously raising interest rates and then accelerating the contraction of the balance sheet; The People's Bank of China has implemented relatively loose monetary policies, such as the reserve requirement reduction and multiple interest rate cuts since the beginning of this year. The difference in monetary policies between the two countries has led to a reverse movement in long-term interest rates, namely in the United States10The yield of one-year treasury bond bonds rose significantly, while China10The yield of one-year treasury bond dropped significantly. This year4In January, the long-term interest rate difference between China and the United States began to reverse. So far, the United States10The yield of one-year treasury bond is higher than that of China10High yield of one-year treasury bond bonds40-50Basis points. The inverted and continuously expanding interest rate difference between China and the United States will trigger cross-border capital flows from China to the United States, thereby lowering the exchange rate of the RMB against the US dollar. In the short term, the inflation rate in the United States will still be at a high level, which will force the Federal Reserve to continue implementing interest rate hikes and scale reductions. China's weak economic growth still requires further efforts from fiscal and monetary policies, and the People's Bank of China has the possibility of further interest rate cuts. This means that the RMB/USD exchange rate will still face significant depreciation pressure in the short term. stay2022During the year, it is not ruled out that the exchange rate of the Chinese yuan against the US dollar will fall below7.0The possibility of. 7.0Although it is an important integer level, its importance to domestic and foreign investors is not as strong as we imagine. On the one hand, in the2015year811After the exchange rate reform, we have fallen below it several times7.0It did not trigger a significant depreciation of the RMB against the US dollar. On the other hand, the current toolbox of the People's Bank of China to prevent a significant depreciation of the local currency exchange rate is still diverse in tools and abundant in ammunition, such asforeign exchangeDeposit reserve, forward foreign exchange sales reserve, macro prudential management at the foreign exchange level, capital flow management, countercyclical factors, etc. stay2017In, the People's Bank of China pioneered the new policy tool of countercyclical factors. When there is greater depreciation pressure in the foreign exchange market, the counter cyclical factor is an important tool for the People's Bank of China to hedge against the pro cyclical fluctuations in market sentiment (the so-called irrational herding effect). The author's latest calculations indicate that in the2022During the two sharp devaluations of the RMB exchange rate in, the People's Bank of China has actually activated the countercyclical factor According to the statement of the People's Bank of China in its monetary policy execution report on the calculation of countercyclical factors, "when calculating countercyclical factors, the impact of basket currency changes can be removed from the fluctuation of the previous day's closing price compared to the middle price, thereby obtaining the exchange rate changes that mainly reflect market supply and demand, and then adjusting the countercyclical factors to obtain the countercyclical factors. Based on this statement, the author adopts an indirect method, following the formula of "daily middle price=previous day's closing price+basket of currency exchange rate changes+countercyclical factor"2022New EditionCFETSThe weight of the RMB exchange rate index currency basket is calculated to calculate the exchange rate changes of a basket of currencies, and then the countercyclical factor is calculated based on the middle price of the day and the closing price of the previous day. chart1 Analysis chart of the trend of RMB exchange rate and the adjustment of countercyclical factors
Note: The data is sourced fromWindDatabase andwww.investing.comThe adjustment amplitude of the countercyclical factor was manually calculated by the author. As shown in the figure1As shown, during the two sharp devaluations of the RMB/USD exchange rate this year, the People's Bank of China selectively activated the countercyclical factor at important time points, but the duration was very brief. As shown in the table1As shown, during the first sharp depreciation of the RMB exchange rate, this year5month5Rihe6On the day, the People's Bank of China adopted a countercyclical factor to raise the central parity rate between the Chinese yuan and the US dollar by the following amounts:0.64%and0.39%。 The background for the use of countercyclical factors during this period is Eastern Time in the United States2022year5month4On the th, the Federal Reserve announced a rate hike50A basis point, this is from2000The largest single interest rate hike since the beginning of the year.2022year5month5Japan, USA10The yield of one-year treasury bond bonds rose to3.05%The high point of China US interest rate spread is inverted to22The RMB exchange rate is facing significant depreciation pressure based on a basis point. During the second sharp depreciation of the RMB exchange rate,2022year8month30Day9month1Rihe2On the day, the People's Bank of China adopted a countercyclical factor to raise the central parity rate between the Chinese yuan and the US dollar by the following amounts:0.46%、0.29%and0.22%。 The background for using the countercyclical factor during this period is:,2022year8month26At the meeting of central bank governors held in Jackson Hole on the th, Powell's hawkish stance meant that the Federal Reserve would continue to implement aggressive interest rate hikes and balance-sheet tightening policies. As soon as this statement is made, the United States10The yield of one-year treasury bond bonds rose again2022year9month1Japan, USA10The yield of one-year treasury bond bonds climbed to3.26%The high point of China US interest rate spread is inverted to65The pressure on the depreciation of the RMB exchange rate has increased by one basis point. surface1 Reverse cycle factor activation time and adjustment amplitude
Note: The data is sourced fromWindDatabase andwww.investing.comThe adjustment amplitude of the countercyclical factor was manually calculated by the author. It is worth mentioning that our calculations indicate that this year3、5、6、7In January, after the Federal Reserve announced a rate hike1-3Within the day, there have been unexpected changes in the central parity rate between the Chinese yuan and the US dollar, which means that the People's Bank of China can intentionally use countercyclical factors to hedge against the negative impact of the Federal Reserve's interest rate hike on the local currency exchange rate. For example, Eastern Time2022year3month16On the th, the Federal Reserve announced a rate hike25Basis points,3month17On the day, the People's Bank of China adopted a countercyclical factor to raise the central parity rate between the Chinese yuan and the US dollar by0.20%。 Similarly, Eastern Time2022year7month27On the th, the Federal Reserve announced a rate hike75Basis points,7month28On the day, the People's Bank of China adopted a countercyclical factor to raise the central parity rate between the Chinese yuan and the US dollar by0.33%。 The author's previous research found that the People's Bank of China mostly uses countercyclical factors to "raise" the central parity rate, which allows the RMB to appreciate against the US dollar. Meanwhile, the central bank of China often uses countercyclical factors earlier than the official announcement. In summary, in the2022In, it seems that the People's Bank of China has begun to selectively and moderately use countercyclical factors to maintain the basic stability of the RMB/USD exchange rate. So far, compared with currencies such as the euro, yen, and pound, the exchange rate of the Chinese yuan against the US dollar has remained roughly stable, which means that on the one hand, the fundamental situation of the exchange rate of the Chinese yuan against the US dollar has not significantly deteriorated, and on the other hand, the adjustment of countercyclical factors has played a certain role. However, as our previous research has pointed out, although the adjustment of countercyclical factors can stabilize the short-term fluctuations of the RMB/USD exchange rate, it can also increase the uncertainty of the formation mechanism of the RMB/USD exchange rate, and even to some extent affect the development of the foreign exchange forward market. Therefore, we do not recommend that the People's Bank of China primarily stabilize the exchange rate through countercyclical factors. Once the RMB/USD exchange rate faces sustained and rapid depreciation pressure in the short term, the People's Bank of China should tolerate moderate depreciation of the RMB/USD exchange rate and enhance the flexibility of the RMB exchange rate formation mechanism. On the other hand, it should comprehensively use foreign exchange macro prudential management tools, capital flow management, forward-looking expectation guidance, and other means to maintain the stability of the local currency exchange rate. In short, even if the exchange rate between the Chinese yuan and the US dollar breaks in the short term7.0There is no need for relevant parties to worry about a significant depreciation of the RMB against the US dollar.2022During the remaining period of the year, the exchange rate between the Chinese yuan and the US dollar may vary between6.7-7.2Fluctuation within the range. If2023In, China's economic growth rate significantly rebounded, while the US economic growth rate entered a recession, so the RMB/USD exchange rate is expected to rebound significantly. Note: This article only represents the author's personal views. Zhang Ming is the deputy director of the Institute of Finance of the Chinese Academy of Social Sciences and the deputy director of the National Laboratory of Finance and Development; Chen Yinmo is a lecturer at the School of Business at Beijing Language and Culture University and a researcher at the National Finance Development Laboratory |
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