In the first half of the year, the RMB depreciated by about 5% against the US dollar. What factors determine the trend in the second half of the year?

In the first half of 2022, the central parity rate and spot exchange rate of RMB against the US dollar both fell by more than 5%

on June 30, the spot exchange rate of RMB against the US dollar closed at 6.6943 at 16:30, up 29 basis points from the previous trading day. In the whole June, the spot exchange rate of RMB against the US dollar fell slightly, with a cumulative decline of 365 basis points and a depreciation of nearly 0.55%

in the first half of this year, the spot exchange rate of RMB against the US dollar reached an amplitude of 8%, the highest intraday appreciation was 6.3048, the lowest fell below the 6.80 mark to 6.8150, and the accumulated depreciation was 3213 basis points, reaching a range of 5.04%< Img alt= "trend chart of spot exchange rate of RMB against USD in the first half of 2022" style= "width:600px;" src=" https://imagecloud.thepaper.cn/thepaper/image/203/439/362.jpg ">

in the first half of 2022, the RMB dollar spot exchange rate trend chart

in terms of the central parity, in the first half of this year, the RMB dollar central parity fell 3357 basis points from 6.3757 at the end of last year to 6.7114 at the end of June, with a depreciation rate of 5.2%.

from the perspective of trend, the RMB exchange rate against the US dollar rose first in the first quarter, showing a certain risk aversion function in the outbreak of the conflict between Russia and Ukraine. The RMB exchange rate appreciated to the highest point of the year, approaching the 6.30 mark. However, in the second quarter, with the rise of the US dollar index, the RMB exchange rate significantly repaired the overvaluation. After the process from substantial depreciation to stabilization, the central bank also offered a measure to reduce the foreign exchange reserve ratio by 1 percentage point to stabilize the market Field expectations

when looking at the trend in the second half of the year, the market tends to think that there is no basis for trend depreciation of the RMB exchange rate

Societe Generale research predicts that in the second half of 2022, the repair of the overvalued RMB market will not be completed before the dislocation of the inventory cycle between China and the United States, the differentiation of monetary policy and the reversal of cross-border capital outflow. In case of dollar pullback, phased inflow of foreign capital, counter cyclical adjustment by the central bank, or tariff reduction between China and the United States, the RMB will rebound. Considering that the US dollar is “grinding its top”, the adjustment range of RMB against the US dollar may be limited in the future; After the US dollar index reaches its peak, the momentum of appreciation of non US currencies will be highlighted and the RMB effective exchange rate will continue to repair its overvaluation

CITIC Securities predicts that in the short term, the RMB is expected to be more affected by market factors, including the fact that the expectation of interest rate hikes in Europe and the United States has not been settled, which makes it difficult to say the inflection point of the US dollar index, the improvement of Sino US trade relations has created a potential positive for exports, and the market players’ settlement of foreign exchange at high prices and foreign exchange purchasing behavior. Under the interaction of long and short factors, the fluctuation of RMB may be intensified, or the wide range shock pattern may continue to be maintained. After a round of sharp decline, the pressure of RMB devaluation was fully released. For foreign investment, the risk from RMB exchange rate was weakened. In the medium and long term, the RMB is expected to return to the dominance of fundamental factors. The subsequent significant economic recovery will gradually remove the pressure from the weak economic fundamentals, and there is no basis for the trend depreciation of the RMB. However, it is worth noting that the strength and pace of economic recovery and the uncertainty of the epidemic situation may become the game points of RMB exchange rate fluctuations.

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