According to data from the China Foreign Exchange Trading Center, on July 3rd, the central parity rate of the Chinese yuan against the US dollar was 7.2157, an increase of 101 basis points from the previous trading day. Since June 20, the above central parity rate has been lowered for seven consecutive trading days, and on July 3, a single day increase of 101 basis points ended the previous trend of continuous devaluation of the RMB exchange rate. In fact, since the onshore and offshore RMB exchange rates both fell below the "7" level against the US dollar on May 17th, the RMB exchange rate has been under continuous pressure in recent times, gradually falling below the 7.1 and 7.2 levels. However, there is a consensus in the industry that the current round of pressure on the RMB exchange rate is nearing its end, and it is expected to gradually stabilize or return to the appreciation channel in the second half of the year. Why is the RMB exchange rate depreciating? In the second quarter of this year, the depreciation rate of the RMB against the US dollar was relatively fast. Based on the aforementioned central parity rate of the RMB exchange rate, from March 31st to June 30th, the central parity rate of the RMB exchange rate was adjusted by a total of 3541 basis points. During the same period, the onshore RMB exchange rate fell by approximately 5.58% against the US dollar, while the offshore RMB exchange rate fell by approximately 5.72% against the US dollar. Why has the exchange rate of the Chinese yuan fallen against the US dollar recently? Cheng Qiang, the chief macroeconomic analyst of CITIC Securities, said in the research report that there are three main aspects: first, the domestic economy has slowed down since April; Secondly, the downward trend in bond interest rates may lead to some capital outflows; Thirdly, domestic policy expectations and US monetary policy also pose certain disturbances. However, Pang Ming, Chief Economist and Head of Research at Jones Lang LaSalle in Greater China, told Securities Daily that recent exchange rate changes may still be due to differences in the degree of monetary policy easing among different economies. Against the backdrop of widespread interest rate hikes worldwide, China's recent monetary policy orientation has also had a certain impact on the RMB exchange rate. As Pang Ming said, under the influence of multiple factors, the recent reversal of the interest rate difference between China and the United States has shown a deepening trend. Wind data shows that on June 30, the yield of China's 10-year treasury bond and the yield of the United States' 10-year treasury bond were 2.6929% and 3.8100%, respectively. The upside down range of China US interest rate spread represented by this reached about 1.12 percentage points, and the overall average in June was about 1.05 percentage points. In April and May, the average values were 0.63 percentage points and 0.87 percentage points, showing a trend of monthly expansion. In addition to the high interest rate differential caused by the divergence of monetary policies between China and the United States, there are also short-term and phased factors. Pang Ming further analyzed that factors such as the continued weak willingness of enterprises to settle foreign exchange for exports, the high exposure to overseas carry trades, and the concentration of foreign exchange purchases and dividends by overseas listed Chinese companies also bring seasonal and transactional pressure to the RMB exchange rate. How will the RMB exchange rate go in the second half of the year? Looking ahead to the trend of the RMB exchange rate in the second half of the year, the industry generally believes that in the short term, the RMB exchange rate may still be under pressure, but it is a high probability event that the RMB exchange rate will return to the appreciation channel in the second half of the year. It is expected that there will be depreciation pressure on the RMB exchange rate in the short term, but the low point of 7.37 last year is a strong resistance level. The weak economy and mild policy support have already been reflected in the exchange rate, and without major unexpected events, it should not be easily broken through, "Cheng Qiang analyzed in the research report
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：Securities Daily
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