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Why did the central bank respond to the RMB breaking 7 against the US dollar? What was the trend aft

After passing the 7 yuan mark twice in 2016 and 2018, the RMB exchange rate against the US dollar finally fell below the integer position of 7 yuan, which is regarded as an important psychological mark.

On the morning of August 5, the onshore and offshore RMB exchange rates fell sharply by 1000 points against the US dollar, both falling below the 7 yuan mark, setting a new low in this round of adjustment. According to wind data, as of 11:30 on the 5th, the lowest onshore RMB against the US dollar was 7.0424 yuan and the lowest offshore RMB against the US dollar was 7.1057 yuan.

On the A-share market, the beneficiary stocks of RMB devaluation rose sharply, and Huafang shares, Edison power and Zhongqian shares all rose by the limit.

The central bank quickly responded that the RMB exchange rate can remain basically stable at a reasonable and balanced level.

Analysts pointed out that there is no need to pay too much attention to the so-called psychological barrier, and the RMB exchange rate will continue to fluctuate in both directions at a reasonable and balanced level. In the market environment of rising uncertainty, many market participants suggest paying attention to the strategic allocation value of gold related assets.

A thousand points fell sharply, breaking 7 in one fell swoop

The disk showed that the spot exchange rate of the onshore RMB against the US dollar opened at 6.9999 yuan in the morning, only 1 point away from 7 yuan; After opening, the exchange rate quickly broke through the 7 yuan mark, and then fell all the way to the lowest 7.0424 yuan before rebounding. At the lowest point, the onshore RMB fell 1008 points, or 1.45%, compared with the previous closing price. As of 11:30, the latest report of onshore RMB was 7.0250 yuan, 834 points lower than the previous closing price.

Source: wind

Offshore RMB fell below 7 yuan soon after the central parity of RMB against the US dollar was opened in the mainland. Time sharing data show that at 9:16 a.m., the offshore RMB directly fell from 6.9828 yuan to 7.0315 yuan, down nearly 500 points in one minute. Since then, the offshore RMB continued to decline rapidly and rebounded after falling below 7.1 yuan. Compared with the previous closing price, the offshore RMB fell by 1293 points in the morning, up to 1.85%. As of 11:30, the latest report of offshore RMB was 7.0784 yuan, down 1021 points from the previous closing price.

Source: wind

With a sharp drop of 1000 points, it directly broke through the 7 yuan mark. On August 5, the central parity of the RMB against the US dollar was reduced by 229 points to 6.9225 yuan, which not only made a large adjustment, but also directly fell below the 6.9 yuan mark. If we observe the historical data, we will find that in the round of adjustment from May to June this year, the central parity of RMB against the US dollar has never fallen below 6.9 yuan, and this last pass before 7 yuan has become a real defense line. This line of defense was broken today, which can also explain some problems.

Source: wind

Central bank: the RMB exchange rate can

Maintain basic stability at a reasonable and balanced level

On the morning of the 5th, the relevant person in charge of the central bank quickly answered reporters' questions on the RMB exchange rate, and responded one by one to the concerns of everyone, such as why the RMB broke 7, the trend after breaking 7, and the impact of breaking 7 on enterprises and residents.

1. Reporter: why does the RMB exchange rate 'break 7'?

A: affected by unilateralist and protectionist measures and the expectation of imposing tariffs on China, the exchange rate of RMB against the US dollar has depreciated today, breaking through 7 yuan, but the RMB continues to remain stable and strong against a basket of currencies, which is a reflection of market supply and demand and international exchange market fluctuations.

China implements a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. Market supply and demand play a decisive role in the formation of exchange rate. The fluctuation of RMB exchange rate is determined by this mechanism, which is the due meaning of floating exchange rate system. From the perspective of the global market, as the price comparison between currencies, exchange rate fluctuations are also normal. With fluctuations, the price mechanism can play the role of resource allocation and automatic adjustment. If we look back on the changes of RMB exchange rate in the past 20 years, we will find that the RMB against the US dollar has been more than 8 yuan, more than 7 yuan and more than 6 yuan. Now the RMB exchange rate has returned to more than 7 yuan. It should be noted that the RMB exchange rate 'breaks through 7'. This' 7 'is not an age. It can't come back in the past, nor is it a dam. Once it is broken, the flood will flow thousands of miles. " 7 'it's more like the water level of a reservoir. It's higher in the wet season and will fall again in the dry season. It's normal to rise and fall.

Although the RMB has depreciated against the US dollar recently, historically, the RMB has appreciated on the whole. Over the past 20 years, the nominal effective exchange rate and real effective exchange rate of RMB calculated by the bank for international settlements have appreciated by about 30%, and the exchange rate of RMB against the US dollar has appreciated by 20%, making it the most powerful currency among the major international currencies. Since this year, the RMB has maintained a stable position in the international monetary system. The RMB has strengthened against a basket of currencies, and the CFETS RMB exchange rate index has appreciated by 0.3%. From the beginning of 2019 to August 2, the central parity rate of RMB against the US dollar depreciated by 0.53%, less than the decline of the exchange rate of emerging market currencies such as the Korean won, the Argentine peso and the Turkish Lira against the US dollar in the same period. It is a relatively stable currency among emerging market currencies and stronger than reserve currencies such as the euro and sterling.

2. Reporter: what will happen after the RMB exchange rate breaks 7?

A: the trend of RMB exchange rate depends on fundamentals in the long run, and market supply and demand and the trend of US dollar will also have a great impact in the short term. The market-oriented exchange rate formation mechanism is conducive to give play to the role of price lever in regulating the balance of supply and demand, and plays the function of "automatic stabilizer" in macro regulation of economy and balance of payments. As a large country, China has a complete range of manufacturing industries, a relatively perfect industrial system, strong competitiveness of the export sector and moderate dependence on imports. The fluctuation of RMB exchange rate plays a strong regulatory role in China's balance of payments, and the foreign exchange market itself will find a balance.

At the macro level, China's current economic fundamentals are good, positive results have been achieved in economic structural adjustment, strong growth toughness, macro leverage remains basically stable, the financial situation is stable, financial risks are generally controllable, the balance of payments is stable, cross-border capital flows are generally balanced, and foreign exchange reserves are sufficient, which provide fundamental support for the RMB exchange rate. Especially in the context of the current easing of monetary policy in developed economies such as the United States and Europe, China is the only major economy with normal monetary policy. The valuation of RMB assets is still low and the stability is correspondingly stronger. China is expected to become a 'depression' of global funds.

In the process of dealing with exchange rate fluctuations in recent years, the people's Bank of China has accumulated rich experience and policy tools, and will continue to innovate and enrich the control toolbox. In view of the possible positive feedback behavior in the foreign exchange market, the people's Bank of China should take necessary and targeted measures to resolutely crack down on short-term speculation, maintain the smooth operation of the foreign exchange market and stabilize market expectations. The people's Bank of China has the experience, confidence and ability to keep the RMB exchange rate basically stable at a reasonable and balanced level.

3. Reporter: what impact does the RMB exchange rate 'breaking 7' have on enterprises and residents?

A: reform and opening up is China's basic national policy. Foreign exchange management should adhere to reform and opening up, further improve the facilitation of cross-border trade and investment, and better serve the real economy. This policy orientation will not change after the "break 7".

For ordinary people, over the past 20 years, the RMB has risen more and depreciated less against the US dollar and a basket of currencies. China's people's main financial assets are best protected in the RMB, and their external purchasing power has increased steadily. These can be reflected in people's overseas tourism, overseas shopping and children's overseas school.

The same is true of enterprises. We do not want enterprises to be too exposed to exchange rate risk, and support enterprises to buy exchange rate hedging products to avoid exchange rate risk. At the same time, we should also see that at present, the RMB exchange rate may depreciate or appreciate. Two-way floating is the norm. It is difficult for enterprises and even more professional financial institutions to predict the trend of the exchange rate.

Therefore, we suggest that we should focus on the entity business, do not spend too much energy on judging or speculating on the exchange rate trend, and establish the financial concept of "risk neutrality". The purpose of foreign exchange derivatives should be to lock in the foreign exchange cost, reduce the uncertainty of production and operation, and realize the profit of the main business, rather than the profit of the foreign exchange derivatives transaction itself.

In addition, for the RMB exchange rate 'breaking 7', many researchers said that there is no need to pay too much attention to the signal significance of the so-called psychological level, and the RMB exchange rate will continue to fluctuate in both directions at a reasonable and balanced level.

Li Chao's team of Huatai Securities commented that it is not necessary to keep the RMB exchange rate at 7. The key goal of the central bank is the balance of payments. The exchange rate is the intermediary target to achieve this goal. In fact, the exchange rate serves the balance of payments goal. Therefore, there is no bottom line of the so-called seven guarantee. The key is not to have large-scale capital outflow.

Wen bin, chief researcher of China Minsheng Bank, pointed out that the onshore and offshore RMB exchange rates fell by '7' against the US dollar today, which is a reflection of changes in market sentiment. With the improvement of the RMB exchange rate formation mechanism and the degree of marketization, the flexibility of the RMB exchange rate will also increase. There is no need to pay too much attention to whether it breaks the '7' mark. At present, China's economy is running smoothly, the international balance of payments, financial risks are controllable, and the RMB exchange rate index is stable. On the contrary, the US dollar index still has room to continue to decline. There is no basis for devaluation of the RMB against the US dollar. It is expected that the RMB will continue to fluctuate two-way against the US dollar at a reasonable and balanced level.

Li Liuyang, chief foreign exchange analyst of China Merchants Bank, said that at present, the supply and demand of China's domestic foreign exchange market is relatively balanced and has adapted to external shocks to a certain extent. This year, China's trade surplus has increased on the whole. Good export income and product price advantages will continue to promote additional RMB positions in the international market, so as to support the stabilization of the RMB exchange rate.

Devalued beneficiary stocks rose sharply

With the RMB exchange rate 'breaking 7', in the morning of August 5, RMB devaluation benefited from the collective rise of concept stocks.

As of the noon closing, the RMB devaluation concept stock index of wind devaluation rose by 1.23%, and among the constituent stocks, Huafang shares, Edison power and Zhongqian shares all rose by the limit; Superstar technology, Jiaxin silk, Nanfang Co., Ltd., Fengzhu textile, Yongyi Co., Ltd., Huasheng Co., Ltd., Shanghai Sanmao and other stocks rose one after another.

Source: wind

Aviation stocks and other stocks damaged by RMB devaluation fell one after another. As of noon closing, Shenwan air transport industry index fell 1.92%. Within the sector, Air China fell more than 3%, and China Eastern Airlines and China Southern Airlines fell more than 2%.

Source: wind

According to the statistics of zhongzhengjun, under the background of RMB exchange rate depreciation in 2018, a total of 3077 A-share listed companies disclosed the exchange gain and loss data of that year in their annual reports. Among them, the exchange gains and losses of 1919 companies are negative and 938 are positive. Negative exchange gain / loss represents exchange gain, while positive value represents exchange loss.

From the data, in 2018, there were 454 companies with exchange earnings of more than 10 million yuan, 49 companies with exchange earnings of more than 100 million yuan, and one company with exchange earnings of more than 1 billion yuan, PetroChina, reaching 1.145 billion yuan. In terms of industries, mining, chemical industry, architectural decoration, automobile and other industries have benefited relatively significantly.

Achieving the largest exchange gains in 2018

20 listed companies

Source: wind

Of course, in the fluctuating foreign exchange market in 2018, some people "made money" and many people unfortunately "got shot". The impact of exchange gains and losses on enterprise operation and performance is obvious.

Enterprises with large demand for us dollars or large US dollar liabilities bear the brunt. In 2018, airlines had no suspension