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What is the impact of RMB appreciation

as the New Year begins, let us also start a new life. This time, let's talk about Huishi. On January 11, the RMB central parity rate rose 251 basis points to 6.7909, a new high since July 26, 2018. The appreciation of RMB has reached a record high, so what is the impact of the appreciation of RMB?

As of 13:00, onshore, the offshore RMB broke the 6.75 barrier against the US dollar, a new high since July 2018.

Before, we had to break the "7" when we were still moving. Now, how can we change our position? The RMB has been straightened again.

In fact, this round of RMB appreciation against the US dollar is not a matter of these two days.

This round of appreciation began in mid November 2018. Up to now, the appreciation has exceeded 2%.

If from the closing price of 6.8499 on January 7, the appreciation of RMB on shore will exceed 1000 points in the past week.

It is not only stronger against the US dollar, but also the overall appreciation trend of RMB against a basket of currencies. At present, the RMB exchange rate index of China's foreign exchange trading center has climbed from about 92.40 to around 93.30.

In less than two months, from the last round of unforgettable devaluation to today's rapid development, what has the RMB gone through? What will it do in the future?

What effect will it have on you, me and the boss who pays me? Poke it down!

Reasons for appreciation

1. Expectations for the fed to end the rate hike ahead of schedule

The Fed's actions affect the hearts of the world's currencies.

According to the latest minutes of the Fed's meeting, the rate hike was carried out under the condition that a few members were unwilling to raise interest rates. They believed that there was no inflationary pressure, opposed to raising interest rates again, and acknowledged that the future policy path was not so clear. '

Affected by this, the US dollar index fell sharply, down nearly 1%, approaching the 95 level. In fact, from November 2018 to the end of last year, the dollar index has depreciated by nearly 0.5%. The fall in the US dollar index led to the appreciation of the RMB.

2. The interest rate gap between China and the United States has stabilized

Since December 2018, U.S. bond yields have reversed the upward trend, and the interest rate gap between China and the United States has started to pick up from the low. The change of interest rate difference between China and the United States also plays a key role in the trend of RMB.

Due to changes in market participants' expectations on the US economy and the Fed's policies, the US Treasury bond yield has declined to a certain extent. At present, the 10-year US Treasury bond yield has returned to less than 3%, and the interest rate gap between China and the US has stabilized at a low level, which is conducive to the stability of the RMB exchange rate.

3. China US trade news is good

There is no doubt that China US trade negotiations have a great impact on the trend of RMB.

From January 7 to 9, China and the United States held a vice ministerial consultation on economic and trade issues in Beijing. China's Ministry of Commerce issued a statement saying: the two sides actively implemented the important consensus of the two heads of state, conducted extensive, in-depth and detailed exchanges on Trade and structural issues of common concern, enhanced mutual understanding, and laid the foundation for solving each other's concerns. Both sides agreed to maintain close contact.

4. Continuous effectiveness of regulatory policies

Although there is no specific action by the regulatory authorities in the near future, the deterrent force is still there.

Since the middle of November 2018, the regulatory authorities have not continued to issue relevant policies, but previously launched a series of 'combined fists' such as the restart of counter cyclical factors, issuance of offshore central bank bills, etc., strengthened the macro Prudential Management of foreign exchange, timely carried out counter cyclical adjustment, and played an important role in the overall stability of the RMB exchange rate.

Impact of appreciation

1. Promote overseas tourism and study

For ordinary consumers, the biggest impact of RMB appreciation is that the RMB in their hands is more valuable. Traveling abroad, shopping and studying abroad will cost less than before, or spend the same money, can do more than before.

Of course, from a cost-effective point of view, for overseas shopping and tourism, you have to choose a country with a large appreciation of the RMB against the local currency.

2. Favorable stock market and bond market

The appreciation of the RMB also has an impact on investors in the capital market, but investors who short the RMB should be excluded.

The appreciation of RMB may attract more international capital inflow and enrich domestic liquidity in the short term, which will be good for stock market and bond market. When the market is good, so are the investors.

3. Appreciation of RMB is not conducive to export

The drawback of RMB appreciation is that it is not conducive to exports and affects the profits of export enterprises.

Of course, there are certain advantages and disadvantages in both appreciation and depreciation of RMB. In the long run, it is only stable in a certain range that is most conducive to national economic development.

The future trend is mainly stable

Some people may say that we don't care why the price will rise, but only when it will rise. Experts also have something to say about this thorny problem.

Xie Yaxuan, chief Macro Analyst of China Merchants Securities, believes that in the past few years, the stronger dollar index has suppressed many asset prices, including RMB. The end of the strong dollar cycle will have an important impact on a series of asset prices in the future. Emerging market currencies are expected to get rid of the pressure and the RMB exchange rate is expected to stabilize and recover.

Of course, the long-term trend of RMB exchange rate still depends on fundamentals. With the stability and toughness of the national economy, the further opening of the financial market and the improvement of the market expectation, China's balance of payments and foreign exchange reserves will maintain a balanced and stable scale in the future, all of which will give strong support to the RMB exchange rate.

At the same time, some experts believe that the Fed's expectation of interest rate hike has not been stopped, China's economic growth is still facing downward pressure, and there is still great uncertainty in the Sino US trade negotiations. It is difficult to say that the RMB will appreciate significantly in a trend, but it is hopeful to maintain basic stability at a reasonable and balanced level