The RMB Has Jumped Out Of The Sideways Trading As The Dollar Has Weakened For Several Days In A Row

Dollar weakness for several days in a row, the RMB exchange rate out of the sideways shock, again began a sharp trend.The renminbi broke through the 6.70 mark intraday on February 21, surging more than 300 points on the day, with the offshore renminbi peaking at 6.6893 against the dollar.The onshore yuan closed at 6.7101 per dollar at 16:30, its highest level since January 31 and up 135 basis points from the previous session.

On the same day, the central parity rate of the renminbi strengthened 338 basis points to 6.7220 against the dollar, the biggest rise in three weeks.The strong performance of the yuan in early trading was accompanied by a multi-day retreat of the dollar index.Back in January, there was talk that the fed might end its shrinking balance sheet early, which led to a wild sell-off in the dollar, so the market was paying close attention to the fed's stance on ending the downsizing in the minutes of its January monetary policy meeting.

"Profit-taking by financial institutions is part of the reason for the intraday fall in the renminbi.The short-term rise in the RMB exchange rate is caused by the impact of events, which may temporarily move the fluctuation center of the exchange rate up, and then the marginal effect of the impact will decrease, and the center will gradually return to the level before the event.Li liuyang, chief foreign exchange analyst at China merchants bank, believes that in the short term, the overall exchange rate is still showing a "top, bottom" box consolidation trend.

In the long run, the slowdown in the pace of tightening in developed economies and the shift of global capital mean that for China, external risk constraints will be weakened, the pressure of exchange rate risk will be reduced, and the people's bank of China will have more ample policy space to increase "stable growth".Cheng shi, chief economist at icbc international, said China's monetary policy is expected to move out of the "hidden reef zone" in 2019, further strengthen the "self-centered" feature, maintain a prudent stance more flexibly, and the RMB exchange rate is also expected to stabilize.

"If the fed slows down the pace of interest rate hikes, the global economic growth slows down, and the us dollar index falls back, and the domestic economy stabilizes, the stability of the RMB exchange rate will be supported by fundamentals, and we cannot rule out a return to a volatile upward trend.""Said guan tao, a former director of the balance of payments department at the state administration of foreign exchange and a 40-person senior researcher at BBS China finance.

Therefore,many industry experts for this year's RMB exchange rate trend holds a more optimistic attitude."There is a greater chance of a stronger renminbi this year."'with the re-expansion of the people's bank of China's balance sheet, economic fundamentals have begun to repair and asset prices have improved,' said hong hao, managing director of bocom international.

"Emerging markets have received a lot of attention from international capital this year, so the renminbi may benefit from capital inflows."Li liuyang said.Standard chartered expects the yuan to rise to 6.65 against the dollar by the end of 2019, as portfolio investment flows flow in.

The RMB's exchange rate reflects changes in China's economic fundamentals.Looking back at 2018, the RMB exchange rate has formed a two-way fluctuation of "overshooting and regression" around the equilibrium exchange rate.According to the calculation of cheng shi's team, in the third quarter of last year, the effective exchange rate of RMB has been significantly lower than the equilibrium exchange rate, indicating that although China's economy is under pressure at a certain stage, the RMB exchange rate has been subject to excessive depreciation adjustment relative to the economic fundamentals and has entered a state of low valuation.By the end of last year, the gap between the effective and equilibrium exchange rates had narrowed, but it remained.This leaves room for a return to valuation in 2019, helping to further cushion external exchange rate risks.


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