Offshore RMB/USD exchange rate missed the 7.1 mark during trading Expert: Foreign trade enterprises should adhere to the principle of "risk neutrality"
2023-05-31
Since the onshore and offshore RMB/USD exchange rates both fell below the "7" mark on May 17th, the RMB/USD exchange rate has continued to be under pressure. On May 30th, the offshore RMB fell short of the "7.1" level against the US dollar during trading. As of the reporter's press release, the offshore RMB/USD exchange rate fluctuated around "7.1", reaching a minimum of 7.1095. The onshore RMB also showed a weak exchange rate against the US dollar, with the lowest intraday reading of 7.0995, close to the "7.1" level. According to data from the China Foreign Exchange Trading Center, on May 30th, the central parity rate of the Chinese yuan against the US dollar was set at 7.0818, a decrease of 243 basis points from the previous day. Since May, the central parity rate of the Chinese yuan against the US dollar has been depreciated by 1764 basis points. In this regard, Feng Lin, a senior analyst of the Research and Development Department of Oriental Jincheng, said in an interview with the Securities Daily that the dollar index continued to rise due to fluctuations in the market's expectation that the Federal Reserve would stop raising interest rates in June and shift to cutting interest rates within the year, as well as the impact of factors such as the approaching US debt ceiling, which pushed up the demand for risk aversion. Under the price comparison effect, the exchange rate of the Chinese yuan against the US dollar decreases accordingly, which is in line with the normal market volatility pattern. According to Wind data, after the onshore RMB exchange rate "broke 7" against the US dollar on May 17th, it depreciated by approximately 1.15% from May 18th to May 29th, while the US dollar index appreciated by approximately 1.37% during the same period. During this period, the exchange rates of major non US currencies such as the euro, yen, and pound against the US dollar decreased by approximately 1.22%, 2.01%, and 1.10%, respectively. In addition, the three major basket of RMB exchange rate indices, including CFETS, remained basically stable during the same period, which also means that there has not been a single rapid depreciation trend of the RMB against the US dollar recently, "Feng Lin said. Looking ahead to the future trend of the RMB exchange rate, interviewed experts generally believe that there is no significant room for depreciation of the RMB. Weng Zichi, senior investment advisor at Jufeng Investment Consulting, believes that with the expected increase in interest rates by the Federal Reserve, the RMB exchange rate is expected to enter a stable range by the end of the second quarter. In Feng Lin's view, in the short term, the "breaking 7" trend of the RMB may continue for a period of time. With the Federal Reserve entering the closing stage of this round of interest rate hikes, coupled with the impact of the US banking crisis, the downward pressure on the US economy further increases, and the possibility of a sustained rise in the US dollar index in the future is not high. With the overseas economy declining this year and the prospect of sustained recovery in the domestic economy, there is no significant room for the RMB to depreciate. In the second half of the year, with the continuous process of domestic economic recovery and taking into account other influencing factors, there is a possibility of a slight appreciation of the RMB against the US dollar by around 2.0% year-on-year at the end of the year, which is a slight increase from 6.95 at the end of last year to around 6.8. "Feng Lin predicts. Regarding the issue of how foreign trade enterprises cope with the risk of exchange rate fluctuations, Weng Zichi stated that foreign trade enterprises can choose to settle their own currency, advance or delay the settlement and sale of foreign exchange, and choose exchange rate hedging products to cope. The weakening of the RMB exchange rate will bring a certain price advantage to export enterprises and enhance the overseas competitiveness of China's exported goods. Feng Lin said that the impact of exchange rate changes on exports requires a transmission period, and the short-term impact is relatively limited; At the same time, the weakening of the RMB exchange rate will correspondingly increase the costs of importing enterprises,
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：Securities Dairy
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