The rapid depreciation of the RMB against the U.S. dollar since late April has not been suspended.

After the foreign exchange deposit reserve ratio, will the central bank continue to use other counter-cyclical adjustment tools? How much room is there for the subsequent adjustment of the exchange rate of the RMB against the US dollar? become the focus of market attention.

This round of onshore and offshore RMB exchange rates have fallen by 5.3% and 6% respectively

Onshore market, starting from April 20 , the spot exchange rate of the RMB against the US dollar from 6.3778 to the closing price of 6.7202 on May 9, a cumulative decline of 3424 basis points, depreciated by more than 5.3% in just 11 trading days.

was the first to initiate the sharp drop in the exchange rate of the offshore RMB against the US dollar. From the closing price of 6.3788 on April 18 to the intraday break of 6.77 on May 9, the current round of RMB The exchange rate fell more than 6 percent in the offshore market, which was more reflective of international investors’ expectations.

“Multiple uncertainties brought about by the epidemic and prevention and control measures have pushed up the implied risk premium of Chinese assets, and the Fed’s recent continuous ‘hawkish’ statements have pushed the US dollar to strengthen , resulting in the rapid weakening of the RMB exchange rate since late April.From a transaction perspective, the short-term trend of the RMB against the US dollar exchange rate may mainly depend on changes in the epidemic and anti-epidemic prevention and control measures.” Huatai Securities in the latest update pointed out in the research report.

Industrial Research believes that the recent short-term RMB exchange rate market is dominated by cross-border capital in the stock market and domestic dollar liquidity. On the one hand, the inflow and outflow of funds on a single day under the Shanghai-Shenzhen-Hong Kong Stock Connect are positively correlated with the rise and fall of the exchange rate, that is, the feature of “share-exchange linkage”. After the central bank implemented the domestic dollar RRR cut on April 25, the rebound of the RMB exchange rate was accompanied by a large inflow of funds under the landing stock connect, and the repair of overvaluation occurred during the period of capital withdrawal. A-shares have been affected by the tightening of monetary policy by the central banks of major overseas developed economies, and are still in the process of bottoming out. pressure. On the other hand, in the past two years, the domestic dollar flooded and supported the strengthening of the RMB.

” After the holiday, although the Fed’s latest meeting did not release further hawkish signals, due to the outflow of funds and concerns about the economic growth prospects under the epidemic, compared with other majorFor non-US currencies, the RMB exchange rate fell more sharply in the past two weeks. ” said a person from the financial market department of a large state-owned bank.

Whether the counter-cyclical policy is further introduced

After the central bank issued a counter-cyclical signal by reducing foreign exchange deposit reserves, the RMB against the US dollar resumed after a short pause go lower. Therefore, the market is particularly concerned about the central bank’s next move.

On April 25, the People’s Bank of China announced that in order to improve the ability of financial institutions to use foreign exchange funds, the People’s Bank of China decided to reduce financial institutions from May 15, 2022. The foreign exchange deposit reserve ratio will be reduced by 1 percentage point, that is, the foreign exchange deposit reserve ratio will be lowered from the current 9% to 8%. But after a brief rebound against the dollar, the yuan fell further after the May Day holiday.

In the latest research report, Huang Wentao, chief economist of China Securities, pointed out that in terms of monetary policy hedging by the central bank, according to the rhythm of 2015, the general exchange rate depreciation is about 2%. Hedging is started by reducing foreign exchange deposit reserves by releasing foreign exchange liquidity, releasing reserves, and intervening in the offshore market. At present, the central bank has started the first clear intervention around 6.6, and it is expected that the central bank will also be willing to temporarily maintain the position of the exchange rate.

Industry Research pointed out that under the parallel of the Fed’s “interest rate hike + balance sheet reduction”, the pressure on the global stock market and the rise in domestic US dollar interest rates are both negative for the RMB exchange rate, and the rhythm focuses on the integer mark The support of the nearby foreign exchange settlement and the timing of the introduction of the central bank’s counter-cyclical policy may cause the pace of exchange rate adjustments to slow down.

How big is the subsequent depreciation pressure

In the context that the Fed will raise interest rates and shrink its balance sheet at the same time, the market is more concerned about the subsequent depreciation space of the RMB How big is it.

Huang Wentao pointed out that in the rhythm of devaluation, the current pressure is the greatest.

He believes that in the interest rate gap between China and the United States, in accordance with the trading logic of “buying expectations and selling reality” of US bonds, generally in the game period of the Fed’s interest rate hike and balance sheet reduction expectations, The U.S. Treasury bond has the fastest upward trend. After the tightening is confirmed, the U.S. bond interest rate is expected to enter a period of high consolidation in the beginning of the second and third quarters. It may be gradually corrected in the later period. At the same time, it should be noted that the RMB exchange rate and interest rate spread are affected by various factors such as capital flow control, bond market currency structure, and credit structure of financing entities, so there is no single corresponding relationship.

Huatai Securities pointed out that before the epidemic and related uncertainties subsided significantly, the RMB exchange rate may face certain depreciation pressure in the short term, but fundamental factors do not support the RMB structure Sexual devaluation.

The agency pointed out that only stable expectations and stable growth can stabilize the exchange rate. The real exchange rate of the RMB is adjusted mainly through relative price deflation, and there is no need for a significant depreciation of the nominal exchange rate; and from the perspective of cross-border capital stock and flow, the RMB does not have the basis for a substantial depreciation. On the other hand, the US dollar index may usher in a “correction window” in June after two 50 basis point interest rate hikes and the start of balance sheet reduction. The real tail risk of a larger devaluation of the renminbi comes from uncertainty about macro and policy expectations, with interest rate spreads and exchange rate changes being the result rather than the cause. The pain point of stabilizing the exchange rate is stabilizing expectations and growth, and interest rate differentials should not be a constraint on interest rate cuts or other counter-cyclical policies.

“We believe that the exchange rate of RMB against the US dollar will show a two-way volatility in the second quarter. The yield is driven by the Fed’s tightening expectations and may rise to a maximum of 3.5% in Q3, and the U.S. dollar index may still further rise to around 105 in the short term), and there is still some room for the RMB to depreciate in the future, but the magnitude is generally controllable.” The macro research team of Zheshang Securities believes that .

Changjiang Securities believes that the Sino-US monetary policy cycle continues to dislocate, and the RMB may still have depreciation pressure in the short term, but there is not much room for depreciation. At present, the core contradictions facing China and the United States are different, which leads to the continued misalignment of the direction of monetary policy. However, with the inflection point of the epidemic in my country and the acceleration of the policy of resumption of work and production, the RMB exchange rate may stop falling and rebound.