What is the impact of RMB exchange rate appreciation
Hong Kong's Wande news agency reported that since October 29, with the news that the trade negotiations are progressing smoothly, the central parity of the RMB against the US dollar began to move out of the appreciation track, breaking away from the 'straight line' in the previous nearly two months. On November 5, after a lapse of 94 days, it returned to within the 7 yuan level.
From the recent appreciation process of RMB exchange rate, the onshore and offshore prices of RMB tend to be the same. Generally speaking, offshore RMB is more sensitive to marginal information, and the phenomenon of chasing up and killing down is more prominent. The price difference between onshore and offshore prices has also become a window to observe market sentiment and expectations. Some time ago, the offshore RMB exchange rate was generally lower than the onshore exchange rate, but recently the two converged and the price difference was basically smoothed out.
The RMB's return to the 7 level is mainly affected by the following factors.
First, the upward trend of the US dollar is weak. The continuous strength of the US dollar index since April 2018 may be close to the top.
The US dollar index fundamentally depends on the extent to which the US economy is' outshining others'. According to the forecasts of IMF, Fitch and other authoritative institutions, the difference in economic growth between the United States and Europe will significantly widen in 2018 and 2019, and this difference will converge in 2020 compared with this year. The real GDP growth rate of the United States fell to 2.09% from 2.35% in 2019, and that of Europe rebounded from the low point of 1.16% to 1.39%. This determines that the momentum of further strengthening of the US dollar index will be weakened.
At present, the UK is likely to successfully withdraw from Europe in January 2020. During this period, the impact of sterling on the US dollar will change from "push up" to "pull down" (it accounts for 11.9% in the US dollar index, second only to the euro and the yen). At present, the exchange rate of sterling against the US dollar has rebounded from the low of 1.20 to 1.29, and there is still limited room for appreciation. But what is important is that the sterling has shifted from devaluation to rebound, which will have a more obvious impact on the US dollar index.
Second, the attractiveness of RMB assets has increased. The inflow of foreign capital into China's stock and bond market brought about by financial opening to the outside world is gradually becoming an important component of China's balance of payments, which supports the RMB exchange rate under the pressure of direct investment and current account.
According to the data released by the central bank on October 31, by the end of the third quarter, the scale of Chinese stocks and bonds held by foreign investors had reached 1.8 trillion yuan and 2.2 trillion yuan respectively, both reaching record highs, with positions increasing by 53.56% and 27.60% respectively compared with the end of 2018, with a total position of nearly 4 trillion yuan, an increase of 38.04% compared with the end of last year.
With the global central banks stepping into the tide of interest rate cuts, the scale of overseas negative interest rate assets has expanded rapidly, reaching a peak of US $17 trillion, accounting for 30%, while the Central Bank of China still maintains and cherishes normal monetary policy space. At present, the return on RMB assets is "more and more positive" in the world, and the 10-year U.S. debt interest margin has reached 153bp.
One of the major concerns of foreign capital inflow into China is that it is worried that the RMB exchange rate will depreciate significantly. Previously, the RMB exchange rate 'kept at 7' has made this problem hanging high. After the RMB exchange rate broke 7 in one fell swoop on August 5 this year, it can be seen that the inflow of northward funds has accelerated significantly, and the scale of foreign capital's increased holdings of Chinese bonds also rebounded sharply in September.
The trend of RMB exchange rate is stronger and stronger, which is generally good for RMB assets. Historical data show that most countries' local currency exchange rates change in the same direction as the stock market, and the exchange rate stabilizes and rebounds, which is good for a shares, which is expected to stimulate foreign capital to increase investment in Chinese bonds.
Recently, the trend of net capital inflow to the North has continued to pick up. On Tuesday, the net inflow of funds from the North was 5.2 billion yuan. Since October 24, the funds from the north have been flowing into a shares for 9 days. Affected by this, the Shanghai index once stood at 3000 points.