Under the credit standard, if there is a dominant currency, then for any economy, there are in principle two exchange rates: bilateral financial exchange rates and trade-weighted multilateral trade exchange rates. Under the current international monetary system dominated by the US dollar, the bilateral financial exchange rate refers to the exchange rate of an economy’s currency against the US dollar, which is also the exchange rate considered in the cross-border flow of capital.
From this year ’s situation, according to WIND data, As of May 22, the CFETS RMB exchange rate index (a basket of indexes) has increased by 1.97 year-to-date %, About 2%, and the bilateral exchange rate of RMB against the US dollar in CFETS has depreciated by about 2.2%. In other words, the RMB depreciated against the US dollar by about 2%, but the RMB index of a basket of currencies appreciated by about 2%. There has been a divergence between the RMB trade exchange rate and the RMB financial exchange rate.
Figure 1 shows the trend of the US dollar index this year. The US dollar index on March 9 is the lowest point so far this year. The lowest point in the chart is 94.63, and the closing price is 95.06. Subsequently, due to the financial turmoil, the US dollar experienced liquidity panic, and the US dollar index strengthened all the way, with an intraday high of 103.01 on March 20 and a closing price of 102.39. Starting on the 18th, the closing price of 6 consecutive trading days remained above 100. Starting from March 23, as the Fed was determined to do more to the market, it announced a $ 700 billion bond purchase plan and promised unlimited cap easing. The dollar index subsequently declined, but still showed a strong dollar trend at zero interest rates. As of May 26, the US dollar index fell below 99 and entered the 98-99 range.
Figure 1 The trend of the US dollar index since the beginning of this year
Figure 1 The trend of the US dollar index since the beginning of this year
Figure 2 shows the trend of the bilateral exchange rate of RMB against the US dollar. The exchange rate of the RMB against the US dollar reached an intraday low of 6.84 on January 20, and the closing price was the lowest on January 17, about 6.86. As of May 28, the onshore RMB exchange rate against the US dollar was about 7.16, and the depreciation rate during this period was about 4.4%.
Figure 2 The trend of the bilateral exchange rate of RMB against the US dollar since the beginning of this year
Figure 2 The trend of the bilateral exchange rate of RMB against the US dollar since the beginning of this year
5 On the 27th and 28th of the month, the offshore and onshore renminbi further depreciated against the US dollar, approaching the previous high in September 2019. Regardless of the onshore exchange rate or offshore exchange rate, the current US dollar to renminbi exchange rate has hit nearly 9 months Highs.
Comparing Figure 1 and Figure 2, the trend of the US dollar index and the trend of the bilateral exchange rate of RMB against the US dollar are not consistent in trend. From May 26 to May 28, the closing price of the US dollar index fell for three consecutive trading days, and the RMB depreciated against the US dollar for three consecutive trading days.
The special period of the 2020 epidemic economy and finance has such a special result. Any non-USD currency basket pricing will encounter such problems. The RMB exchange rate system is to maintain the stability of a basket of currencies, emphasizing the exchange rate of trade (effective exchange rate), and also attaching importance to the bilateral exchange rate of RMB and USD (financial exchange rate). On the basis of maintaining a stable basket of currencies, the bilateral exchange rate (financial exchange rate) between the RMB and the US dollar was reversed, and a counter-cyclical adjustment factor was added to correct the excessive fluctuation of the RMB to the US dollar. Under this pricing mechanism, because some of the emerging currencies in the basket of currencies depreciate against the US dollar, the renminbi converted from the currency will appreciate against these currencies. As a result, the renminbi will depreciate against the US dollar, but due to other emerging currencies The devaluation of market currencies is even greater, and the exchange rate of the RMB basket of currencies is still appreciating. This is what the above-mentioned RMB depreciated against the US dollar, but the RMB index of a basket of trade currencies has appreciated, which means that the RMB trade exchange rate and the financial exchange rate have diverged.
To maintain the stability of a basket of currencies, in this special period of epidemic economy and epidemic finance, the excessive depreciation of currencies of some emerging economies against the US dollar has amplified a basket of currencies The conflict between the stability of the trade exchange rate and the stability of the bilateral financial exchange rate between China and the United States. Especially the South African Rand, Mexican Peso, Turkish Lira, and these currencies are too volatile against the US dollar, resulting in excessive pressure on the RMB index. If you want to maintain a stable basket of RMB indexes, you need to adjustThe exchange rate of RMB against the US dollar has led to pressure on the exchange rate of RMB against the US dollar.
It can be seen that, from the pricing method, in this special period, to maintain a stable basket of currencies, the bilateral exchange rate (financial) of the RMB against the US dollar will depreciate. pressure. This shows that the US dollar index in Figures 1 and 2 has weakened, but the RMB has also depreciated against the US dollar.
From the perspective of capital flows, capital flows from the north have also flowed in recently, and there is no depreciation pressure caused by capital outflows. From the economic fundamentals, China has entered the normal stage of epidemic prevention and control, and the social life order is gradually returning to normal. However, due to the great uncertainty in global epidemic prevention and control, the pressure of insufficient total demand still exists. Therefore, Lowering interest rates is also the choice of future monetary policy, and the interest rate differential between China and the United States will be reduced to a certain extent. However, from past experience, the interest spread may not be an important factor in the arbitrage capital’s impact on the RMB exchange rate.
The recent depreciation of the RMB, especially the large depreciation of the offshore and onshore markets in the past two days, is more like the news effect mentioned in the exchange rate news model To the end, I do n’t think it ’s too much to interpret.
Various epidemic events or news will appear in the epidemic economy and epidemic finance, which will affect the exchange rate trend. Since this year, from March 9th to March 20th, when the US dollar index has risen sharply, the global non-US dollar currencies have basically depreciated significantly. The best depreciation window. According to the closing price, the US dollar index depreciated by 8.03% from March 9 to March 19, and many emerging economies have depreciated more than 15%. The RMB depreciated against the US dollar by 2.04%. The stability of the US dollar exchange rate exceeded expectations. From this perspective, if there is some compensatory depreciation of the RMB exchange rate, it is the lack of smoothing the previous depreciation with time.
The epidemic economy and epidemic finance, the United States is taking a strong dollar line at zero interest rates. The euro, pound, etc. in the composition of the dollar index are all negative interest rates, and the dollar itself has a strong foundation. At the same time, there is still significant uncertainty in the overseas epidemic, especially in some large emerging economies, such as Brazil, where the epidemic situation is still in a serious period, and its currency weakness should be common sense. Therefore, there will still be a conflict between the stability of the RMB basket of currencies and the stability of the exchange rate of the RMB against the US dollar. In the context of epidemic economy and epidemic finance, divergence of RMB trade exchange rate and RMB financial exchange rate may occur frequently.