As of 19:00 on September 8, the exchange rate of RMB against USD in the onshore market hovered around 7.3409; The exchange rate of RMB against the US dollar in the offshore market hit 7.3508, and the intraday low was 7.3620.
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"Behind this, Saudi Arabia and Russia suddenly extended the time for voluntary crude oil production reduction, which continues to ferment in the foreign exchange market." A foreign exchange trader of the Bank of Hong Kong pointed out to reporters. As a result, the rising tide of dollar buying has surged again this week.
The reason is that Saudi Arabia and Russia's move led to the rise of oil prices and the resurgence of inflationary pressure, which led the market to expect that the Federal Reserve would have to further raise interest rates, leading to the rise of the dollar index.
Data shows that the probability that Wall Street expects the Federal Reserve to raise interest rates in November has risen to 60%.
"As long as the Fed's interest rate increase cycle is not over, the rising tide of dollar buying will not stop." The above-mentioned foreign exchange trader of the Bank of Hong Kong said frankly. However, this has virtually created new devaluation pressure on non US currencies.
In addition to the RMB exchange rate hitting year after year lows, the yen once approached the lowest point of 150 against the dollar in 10 months, the Philippine peso hit the lowest point in the past 9 months, and the Bloomberg Asia Foreign Exchange Index fell to the lowest level in the past 10 months.
Faced with the falling exchange rate, Japanese government official Junichi Suzuki said that he would not rule out taking any action against excessive exchange rate fluctuations. In addition, the market noticed that the central banks of India and Indonesia began to intervene in the foreign exchange market in the past few days to stabilize the exchange rate of their own currencies.
It is worth noting that on September 1, the People's Bank of China decided to cut the reserve ratio of foreign exchange deposits of financial institutions by 2 percentage points from September 15, that is, the reserve ratio of foreign exchange deposits will be lowered from the current 6% to 4%.
In the view of many insiders, the above measures are to hedge the risk of RMB exchange rate overshoot caused by the further differentiation of monetary policies between China and the United States.
"Considering that the above measures to reduce the reserve requirement ratio for foreign exchange deposits were implemented on September 15, its substantial impact on the RMB exchange rate may not be apparent until September 15," said a domestic private equity macroeconomist.
In his view, the current RMB exchange rate has repeatedly hit the low point within the year, which is more affected by the short-term trading atmosphere, because Saudi Arabia and Russia unexpectedly decided to extend the voluntary production reduction time, leading to the rise of oil prices, which is causing a series of domino effects, including the market bet that the Federal Reserve will further increase interest rates, the 10-year US Treasury yield will rise again The upside down of the interest rate difference between China and the United States may widen again, making overseas quantitative investment funds short RMB in advance for arbitrage.
"However, this short-term trading behavior may not change the trend of steady appreciation of the RMB in the medium and long term," said the domestic private equity macroeconomist. After all, the end of the interest rate increase cycle by the Federal Reserve before the end of the year is still a probability event, when the dollar index falls back on the sound of the call, the RMB exchange rate will stabilize and recover. At present, many investment institutions still expect the RMB/US dollar exchange rate to return to 7-7.1 at the end of the year.
Probing into the Causes of RMB Exchange Rate Reaching Year after Year Low
In the eyes of insiders, the RMB exchange rate at home and abroad hit new lows in the year on September 8, more likely due to the inertia of market transactions.
After all, the US dollar index rose above 105 on the evening of September 7, leading to a wave of short selling of the RMB exchange rate in the morning of September 8 in the foreign exchange market. If the RMB exchange rate hit a new low within the year, it would attract some short-term capital to short sell the RMB exchange rate for arbitrage.
In the view of many Wall Street hedge fund managers, the biggest driving force supporting the continuous rise of the dollar index is the strong oil price. After Saudi Arabia and Russia unexpectedly decided to extend the voluntary production reduction time, Brent crude oil futures have stabilized above 90 dollars/barrel, making the market feel inflationary pressure or make a comeback, and the Federal Reserve is expected to further raise interest rates.
This directly led more funds to adopt the short covering strategy of US dollars, triggering the rise of the US dollar index and the collective decline of non US currencies.
In addition, the global economic downturn has made the situation of Asian foreign trade grim, which has also dragged down the exchange rate valuation of Asian foreign trade currencies.
A Hong Kong private equity fund manager told the reporter that due to recent data showing that the amount of foreign trade imports and exports of many Asian countries continued to decline, some macroeconomic hedge funds began to join the camp of short selling Asian currencies. Because their severe foreign trade situation in Asia will lead to a decrease in the foreign trade surplus of Asian export-oriented countries, trigger a decline in the exchange rate of Asian foreign trade currencies, and make Asian currencies such as RMB suffer greater short selling pressure.
The chief economist of CITIC Securities clearly believes that the recent weakness of the RMB is due to the impact of the strengthening of the US dollar, on the other hand, the abundant domestic liquidity since the second quarter, and the slowing down of the slope of China's economic repair in the second and third quarters.
The aforementioned foreign exchange traders of the Bank of Hong Kong pointed out that another important driver that led to the RMB exchange rate hitting new lows in the year was the reversal or widening of the interest rate gap between China and the United States. At present, high oil prices and rising inflation are making Wall Street expect the Federal Reserve to further raise interest rates, and the market speculates that relevant Chinese departments may cut interest rates to stimulate economic recovery, The resulting further differentiation of monetary policies between China and the United States may widen the interest rate gap between China and the United States again, attracting many overseas quantitative investment funds to sell short RMB in advance for arbitrage.
"However, this is more like short-term foreign exchange arbitrage, which may not change the expectations of the RMB exchange rate. Because most overseas investment institutions know that if the RMB exchange rate continues to fall, a new round of exchange rate stabilization measures by relevant Chinese departments will follow, leading to a sharp increase in the probability of losses from short selling." He said frankly.
Is the Asian currency defense war starting again?
It is worth noting that more and more Asian countries can no longer sit still in the face of falling exchange rates.
On September 6, Makoto Kanda, Japan's Deputy Finance Minister in charge of international affairs, said that there had been speculative fluctuations in the yen foreign exchange market. If these moves continued, the Japanese government would properly handle them without excluding any options.
Two days later, Japanese government official Junichi Suzuki said that he would not rule out taking any action against excessive exchange rate fluctuations.
At the same time, the central banks of the Philippines and Thailand have warned that they may take foreign exchange intervention to stabilize their currency exchange rates.
Alvin T. Tan, head of monetary strategy for emerging markets in capital markets of Royal Bank of Canada, said: the direct impact of the sharp rebound of the US dollar index is that most Asian central banks do not dare to relax monetary policy again to avoid further devaluation of their own currencies.
Since this month, the central banks of Indonesia, South Korea and the Philippines have kept interest rates unchanged, but they have not hinted that monetary policy will be relaxed soon.
Perry Warjiyo, governor of the Bank of Indonesia, pointed out that all countries are experiencing currency devaluation, and now the focus is on stabilizing exchange rates through intervention.
Even some Asian countries continue to promote relatively loose monetary policies, they have also taken other measures to stabilize their currency exchange rates.
At the beginning of September, the People's Bank of China decided to cut the reserve ratio for foreign exchange deposits. The market generally believes that this move is a precaution - that is, to mitigate the risk of RMB exchange rate overshoot caused by the continued differentiation of monetary policies between China and the United States.
The aforementioned macro economist of domestic private equity funds analyzed to the reporter that although the call for the Asian currency defense war has been heard again recently, the actual situation may not be so severe. One reason is that the Federal Reserve's interest rate increase cycle is still nearing the end, which limits the space for the dollar index to continue to rise; Second, whether the unexpected decision of Saudi Arabia and Russia to extend the voluntary production reduction time can make the oil price rise still needs further observation; Third, the economic growth of Asian economies is still in the forefront of the world, laying a good fundamental foundation for the stability of Asian currency exchange rates.
"The current general decline in the exchange rate of Asian foreign trade currencies is more like a short-term foreign exchange transaction, which may not affect the medium and long-term appreciation trend of Asian currencies. Because in the medium and long term, the most important factor determining the rise and fall of a currency's exchange rate is whether the country's economic fundamentals can continue to grow steadily." He stressed.
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[Editor in charge: h001]
