RMB short - term substantial appreciation! Should exchange be settled now? Then the exchange rate moves...
On August 11, the onshore yuan jumped more than 100 points against the US dollar and regained the 6.95 mark, while the offshore yuan briefly rose against the US dollar, rising as high as 6.9443 by 2pm.
The central parity rate of the RENMINBI against the US dollar hit a five-month high of 6.9438 on August 6, three trading days after it rose in a row since August, rising nearly 1,900 points from its low of 7.1316 on May 29.
In fact, the trend of RMB appreciation was evident in July. In July, the exchange rate of the yuan against the DOLLAR rose first and then fluctuated. In July, the yuan rose 1.34% from 7.07 at the end of June to close at 6.98 against the DOLLAR.
Since the end of May, the onshore and offshore RMB have appreciated in shock.
It is now back to the highs of five months ago
Notably, the dollar fell 4.4 per cent against the pound, 6 per cent against the euro, 5 per cent against the Euro and 4 per cent against the Swiss franc and Australian dollar in July, the biggest declines of the past decade.
With the dollar accounting for about 62 per cent of the world's central bank reserves, the world has had to absorb the flood of money that the Federal Reserve has been printing to save the US economy since the outbreak.
Exchange rate trend forecast in the second half of the year
For the exchange rate trend of RMB against US dollar in the second half of the year, the prediction of various institutions is as follows:
Li Chao, chief economist of Zheshang Securities, believes that as the DOLLAR index declines, the RMB exchange rate appreciates with it. However, frictions between China and the United States rise, and the appreciation rate of the RMB exchange rate is weaker than the decline rate of the DOLLAR index. Into August, the RMB exchange rate continues to rise, is expected to follow-up is still volatile, core influence variable is the uncertainty of the friction between China and America, as the U.S. election nears, trump exist the possibility of transferring contradictions among foreign relations may appear in trade, technology, finance and other fields, and the disturbance of RMB exchange rate. Maintain the exchange rate within the range of 6.85-7.2 this year.
Ding Anhua, chief economist of China Merchants Bank, believes that from the perspective of the trend of exchange rate, China is the first to recover, the interest rate gap between China and the United States remains high, and the expansion of opening-up is expected to further attract capital into China's capital market. The combination of US dollars gradually weakens, and the advantage of RMB exchange rate is emerging. In addition, China practices a managed floating exchange rate system. After years of practice, the monetary authorities have sufficient reserves of tools to keep the RMB exchange rate basically stable at an appropriate and balanced level. Therefore, judging that the RMB exchange rate will not appear drastic fluctuations, the future will show a stable and rising trend pattern.
Lian Ping, chief economist and President of The Research institute of Uesch Investment, believes that two important factors determine the change of the RMB exchange rate in the second half of the year: China is basically oriented well, while the US economy and employment recession is severe, forming a weak DOLLAR; At the same time, the US may periodically push up the dollar in the face of a weak economic recovery, increasing geopolitical friction with the outside world. In this case, it is expected that the second half of the dollar index is likely to fall, RMB will appreciate slightly, around the central fluctuations of 6.8-7.2.
These currencies are going down and down
Under the expectation that the RMB will rise steadily, some of China's export markets are facing devaluation crisis.
The Turkish lira is the most dangerous of the falling currencies. The lira has fallen nearly 19 per cent against the dollar so far this year, its biggest annual decline since 2018, when it lost more than a quarter of its value. The lira has fallen by a fifth against the euro this year.
Most economists believe that the coVID-19 has caused Turkey's tourism industry to collapse, leaving a huge hole in the country's finances. Foreign investors have fled, and over the past 12 months, foreign investors have pulled money out of the country's local currency bonds and stock markets. Faced with these outflows, Turkey burned through tens of billions of dollars in foreign exchange reserves this year to maintain an unofficial peg, marking the end of two decades of free-floating exchange rates. The lira has fallen to record lows against the dollar despite billions of dollars spent trying to defend it.
Now, it seems, Turkey does not have enough reserves to sell to "control" the lira. After falling to a record low last week, the lira continued to bottom on Monday, plunging 1.7 percent to 7.408 against the dollar.
The Indian rupee has been one of Asia's worst performers this year. The rupee fell by nearly 6% in 2020. India's economy has contracted annually for the first time in more than 40 years, hit by the coVID-19 pandemic, which will weigh on further weakness in the rupee. The rupee now trades at 74.85 to the dollar, having hit a record low of 76.9088 in April.
The Pakistani rupee has done no worse than its Indian counterpart this year, falling 8.68% since 2020. On August 11th the Pakistani rupee fell to a record low of 168.87 against the dollar. Fitch, a ratings agency, predicts the rupee will remain on a downward trend in the medium to long term due to rising external debt and expected inflationary pressures. But others argue that the rupee's decline is unsustainable, given the recent rise in remittances and foreign investment, the steady increase in foreign exchange reserves over the past two weeks and the apparent improvement in the current account deficit.
Moreover, the currencies of many Latin American countries caught up in the epidemic are at risk. The Brazilian real has lost almost 30 per cent of its value against the dollar this year, while the Mexican peso has fallen about 20 per cent against the dollar.
Under the current circumstances, it is suggested that foreign trade enterprises:
1. Keep paying attention to the changes of RMB exchange rate, referring to the consensus forecast of major institutions on the "steady and rising" of RMB in the second half of the year, foreign traders can consider whether to grasp the high point and timely settlement of exchange.
2. Keep an eye on the exchange rate changes in major export markets. When the exchange rate of the importing country depreciates sharply, the import cost will increase simultaneously.
Read FOB, CIF and CFR