4hw.com.cn: the RMB exchange rate is the most concerned thing for many investment and wealth management people. Recently, people are concerned about the increase of the RMB exchange rate against the US dollar. What is the RMB exchange rate against the US dollar? For ordinary investors and foreign trade enterprises, how to deal with the rising trend of RMB exchange rate? Let's have a look.
What is the exchange rate between RMB and US dollar in 2018
On March 27, the onshore exchange rate of RMB against the U.S. dollar broke 6.25, while the offshore RMB broke 6.24, both reaching new highs since the '811 exchange rate reform'.
On the whole, there are three main reasons for the sustained strengthening of RMB exchange rate in recent period:
The first is the continued downturn in the dollar. After the 811 exchange rate reform, the RMB exchange rate formation mechanism has been adjusted several times, but it has not changed the trend of passive change following the fluctuation of the US dollar index. Starting from the periodic low of 811 US dollar index (93.5 on August 24, 2015), the US dollar index fell to 89.07 on March 26 this year. The depreciation of the US dollar was about 4.74%, more than 20% lower than the peak level in 2017. During this period, the exchange rate of RMB against the US dollar increased from 6.386 after the 811 exchange rate was changed to 6.27, with an appreciation rate of 1.8%, significantly lower than that of the US dollar. It can be seen that if only considering the fluctuation of the US dollar exchange rate after the 811 exchange rate reform, there is still about 3% room for appreciation of the RMB against the US dollar.
Furthermore, the continued weakness of the dollar index is closely related to the trump administration's intention to keep pace with the global economic recovery. The stable growth of European economy and China's economy has led to a decline in the share of the U.S. economy in the world. According to historical data, this may be the economic fundamentals of the continuous decline of the dollar index (see the figure below). It is worth noting that the monetary policy of the Fed's interest rate hike is not necessarily related to the trend of the US dollar, which has been increasing interest rates four times since 2017, but the continued decline of the US dollar index can be verified.
Second, China's economy is resilient, supporting a steady rise in the RMB exchange rate index. In 2017, China's economic growth picked up for the first time in seven years. In the first two months of this year, China's economy remained prosperous, the PMI index remained at a high level, and the profits of industrial enterprises continued to grow at a high speed of 16.1% in February. The stable economic fundamentals make the RMB not only appreciate against the US dollar, but also the RMB exchange rate index rise steadily. As can be seen from the figure below, the RMB exchange rate index bottomed in the first half of 2017, and began to stabilize and recover in the second half. Therefore, the strengthening of the RMB exchange rate is not only caused by the weakness of the US dollar, but also supported by the economic fundamentals.
Finally, China US trade negotiations cannot be ruled out. There is no doubt that China's trade deficit with the United States is the product of economic globalization and international division of labor, but the RMB exchange rate is still one of the factors that affect the competitiveness of the trade sector between China and the United States. Especially for bilateral trade between China and the United States, the exchange rate factor is the most direct short-term factor affecting the relative purchasing power of the two currencies. In the middle and late 1980s, when the trade war between Japan and the United States was most severe, Japan signed the Plaza Agreement, which resulted in the sharp appreciation of the yen. Japanese enterprises fully implemented the policy of "automatic export restriction". Of course, it is impossible for China to sign such a "Plaza Agreement" with the United States, but in the current context of China's export sector competitiveness is still strong, under the trend of the depreciation of the dollar, tolerance for a certain appreciation of the RMB is one of the important means to alleviate the continuous deterioration of trade friction between China and the United States. Therefore, at the key point of the Sino US trade negotiations, the continued strength of the RMB against the US dollar can also add chips to China's negotiations in other areas between the two countries.
What will be the impact of RMB appreciation?
The overall appreciation of RMB exchange rate has a significant impact on foreign trade enterprises and ordinary investors.
First of all, for foreign trade export enterprises, the negative impact of RMB appreciation is undoubtedly obvious. On the one hand, foreign trade enterprises should closely track the fluctuation of bilateral exchange rate between RMB and its trading counterpart, preferentially choose to use RMB to settle accounts and directly avoid the risk of exchange rate fluctuation; on the other hand, they should conduct hedging operations through foreign exchange derivatives market to lock in the loss caused by exchange rate fluctuation in advance at a lower cost.
Secondly, for ordinary investors, the following three strategies can be used for reference:
First, under the trend of continuous depreciation of the US dollar and steady rise of the RMB, exchange, especially for the US dollar, is not advisable. In a simple calculation, for example, at the beginning of 2017, the amount of foreign exchange purchased by ordinary residents at the exchange rate of 6.95 for individuals was 50000 US dollars, which was about 35000 yuan more than the current exchange rate of 6.27 for 50000 US dollars.
Second, appropriately increase the proportion of gold in asset allocation. The reverse trend of US dollar index and gold price has been repeatedly verified by the market. In the depreciation cycle of the US dollar in 2011, the price of gold rose to US $1890 / oz; in the appreciation cycle of the US dollar since the second half of 2014, the price of gold went down to nearly US $1070 / oz. Since the beginning of 2017, the U.S. dollar index has entered the downward channel, and the gold price has also increased by more than 20%.
Third, there is still a large space for the maintenance and appreciation of RMB assets. At present, measured by the yield of 10-year Treasury bonds, the risk-free yield of RMB assets is 1 percentage point higher than that of dollar assets. As for the stock market, although the A-share market has been greatly affected by the fierce fluctuation of global stock market in recent period, the A-share market is expected to continue the structural bull market in 2018 under the expectation of a new round of reform.
Finally, the overall overseas purchasing power of Chinese residents using RMB will increase. At present, the RMB not only appreciates against the US dollar, but also against a basket of currencies. Therefore, it will be cheaper for domestic residents to travel, consume and shop abroad. However, there are also differences for different countries. For example, the exchange rate of RMB against euro, pound and other strong currencies has remained volatile in the past six months. The purchasing power of RMB in these areas has not changed much. On the contrary, the appreciation trend of RMB against US dollar and Hong Kong dollar is obvious. It will be more cost-effective for residents to travel, consume, study or shop in these areas.