The ups and downs of the RMB exchange rate have always been the focus of the market. On July 24, a reporter from Beijing Business Daily sorted out the information disclosed by China Currency Network and found that during the trading days of this week (July 18-22), the RMB exchange rate against the US dollar showed a slight depreciation as a whole.

 

 Under the two-way fluctuation, the central parity fell by 19 basis points during the week, and the central parity decreased by 408 basis points in the month as a whole.

 

The onshore and offshore RMB exchange rates against the US dollar also fluctuated downward. Regarding the recent trend of the RMB exchange rate, many users began to discuss, what are the reasons for the fluctuation of the RMB exchange rate, and how will it affect the import and export market?

 

The RMB exchange rate depreciated slightly in July

 

The RMB exchange rate fluctuated unabated. According to China Currency Network data, on July 22, the central parity rate of the RMB against the US dollar was reported at 6.7522, an increase of 98 basis points in a single day. On the last trading day of last week (July 15), the central parity rate of the RMB against the U.S. dollar was reported at 6.7503, a cumulative depreciation of 19 basis points this week.

 

 

 

The onshore RMB against the US dollar closed at 6.7518 on July 22, up 162 basis points from the close on July 21, with a single-day appreciation rate of 0.17%. Judging from the performance of the whole week, the onshore RMB fluctuated around 6.75, with the highest appreciation during the week to 6.7317 and the lowest depreciation to 6.7723.

 

Affected by the overseas trading time limit, the offshore RMB market closed on July 23 during the week. In late New York trading on July 23, the US dollar index fell 0.01% to 106.55, and most non-US dollar currencies rose. The offshore RMB appreciated by nearly 400 basis points against the U.S. dollar during the day, with the lowest depreciation in the day to 6.7843 and the highest appreciation to 6.7477. Finally, the offshore RMB against the US dollar closed up 132 basis points at 6.7585.

 

Judging from the recent performance of the RMB exchange rate market, since March 2022, the RMB exchange rate has been depreciating for consecutive months, and the single-day quotations have fluctuated as a whole. After entering the second half of 2022, the central parity rate of the RMB exchange rate is concentrated around the 6.7 mark, with an overall depreciation of 408 basis points within the month. 

 

The exchange rate of RMB against the US dollar in the onshore and offshore markets was mainly concentrated in the range of 6.68 to 6.79, with a depreciation rate of 0.86% and 0.97% respectively during the month.

 

Regarding the recent trend of the RMB exchange rate, the co-chief economist of CITIC Securities clearly pointed out that the slight depreciation of the RMB in July came from two factors. First of all, the US dollar index strengthened sharply in early July, which put a certain pressure on the RMB. Second, the outflow of capital from the stock market in the past week also made the RMB run weaker.

 

"Overall, in the context of a sharp rise in the dollar index and a sharp depreciation of non-US currencies, the RMB's performance also shows that the RMB has a strong ability to withstand pressure. The higher-than-expected increase in exports is an important reason for the RMB's resilience." Clearly analyzed.

 

 

Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics and general manager of the Research and Development Department of the Bank of Inner Mongolia, said that the main reason for the recent depreciation of the RMB exchange rate is the Fed's continuous interest rate hikes, tightening monetary policy, and the resulting rapid rise in the dollar index. Judging from the performance of financial assets, the yield of U.S. bonds has risen, and institutions that have recently increased their holdings of U.S. dollar assets and reduced their holdings of RMB assets have increased. 

 

At the same time, in the first half of the year, there was a lot of pressure on China to stabilize growth and foreign trade, which to a certain extent was also reflected in the trading sentiment in the foreign exchange market.

 

Good for exporters

 

"At the beginning of March, I saw the exchange rate of RMB against the U.S. dollar continued to appreciate, and I was thinking about the exchange rate, but I still wanted to wait and see if it could appreciate further and try to reduce costs. But the overall price is still relatively cost-effective, so I quickly exchanged some." On July 24, Wang Kang (pseudonym), an international student in the United States, recalled to a reporter from Beijing Business Daily.

 

Wang Kang said that taking into account daily needs, from mid-March to mid-April 2022, he successively carried out several foreign exchange operations, with an average cost of less than 6.36 yuan. "After that, I didn't pay much attention to the trend of the RMB exchange rate. When I thought about the exchange rate recently, I found that the cost has increased a lot." Wang Kang added.

 

Regarding how fluctuations in the RMB exchange rate affect ordinary users, many analysts said that fluctuations in the RMB exchange rate have less impact on individual users. 

 

Yang Haiping further explained that even if individual consumers have the need to exchange US dollars, the exchange amount in daily life is relatively limited, and the exchange rate fluctuation will not cause excessive price difference. It is recommended that such users exchange currency as needed.

 

Compared with overseas students like Wang Kang, cross-border traders who are more affected by the fluctuation of the RMB exchange rate have always been the focus of attention. Based on the characteristics of the "double-edged sword" of the RMB exchange rate, since 2020, under the two-way fluctuation of the RMB exchange rate appreciation and fall, import and export cross-border traders are mixed.

 

In Mingming's view, the RMB exchange rate has depreciated compared with 2021, which will help export companies. The devaluation of the RMB will be beneficial to exporters in two aspects.

 

 First, the international competitiveness of export products will increase. Second, exporters suffered high exchange losses due to appreciation pressure last year. After the depreciation pressure has been released this year, exporters will take a breather. .

 

"Generally speaking, the devaluation of the renminbi is generally beneficial to my country's export enterprises, which is reflected in the more competitive export prices. 

 

For enterprises that rely on imported raw materials, it will have a certain impact, because the depreciation of the renminbi will increase the cost of imported raw materials." Yang Haiping also mentioned.

 

Under the two-way fluctuation of RMB, what should foreign trade enterprises do? In this regard, it is clearly suggested that foreign trade enterprises should establish a neutral risk awareness of exchange rates, pay attention to exchange rate trends, make full use of derivatives tools to hedge exchange rate risks, and choose appropriate timing for foreign exchange settlement and purchase.

 

 Yang Haiping said that enterprises should strengthen research and judgment according to their own market positions, and actively take measures to avoid exchange rate risks.

 

 

Maintain basic stability at a reasonable and balanced level

 

On the other hand, a reporter from Beijing Business Daily noticed that in response to the recent trend of the RMB exchange rate, some users have expressed concerns about the devaluation of the RMB on the public platform.

 

 

In fact, since 2022, affected by multiple factors such as interest rate hikes by the Federal Reserve and geopolitical conflicts, the volatility of the global financial market has intensified. The main line of changes in the international foreign exchange market is the strengthening of the US dollar and the weakening of major non-US currencies.

 

 In this context, although the RMB exchange rate against the US dollar depreciated by 5.8%, from the perspective of multilateral exchange rates, the RMB exchange rate index appreciated by 0.1%.

 

"This shows that compared with major international currencies, the stability of the renminbi value is relatively strong." At the press conference on foreign exchange receipts and payments data for the first half of the year held by the State Council Information Office on July 22, the deputy director and spokesman of the State Administration of Foreign Exchange Wang Chunying introduced. 

 

Wang Chunying pointed out that no matter from the price indicators related to the RMB exchange rate, or from the quantitative indicators such as the balance of payments, foreign-related receipts and payments, we can clearly see the characteristics of my country's foreign exchange market's enhanced resilience.

 

Wang Chunying emphasized that the trend of the RMB will be affected by multiple factors such as foreign exchange supply and demand and the international financial market. It may also fluctuate to a certain extent in the short term. It may rise and fall. The RMB exchange rate will remain flexible and float in both directions. Basically stable at a reasonable and balanced level.

 

Regarding the trend of the RMB exchange rate in the next stage, Yang Haiping said that in terms of short-term trends, although the pressure of RMB depreciation has not been completely eliminated, the room for RMB depreciation is limited. In the medium and long term, with the recovery of China's economic growth and the increase in the expectation of a recession in the United States, the possibility of RMB appreciation cannot be ruled out.

 

Mingming believes that the RMB will still face a tangled situation of long and short factors in the future. In the short term, exports will remain resilient, but the US dollar index will remain strong. Looking at the latter part of the year, exports are under pressure to slow down, but the US dollar index may be weaker. Under the interweaving of long and short, the RMB may still fluctuate in both directions.