The central parity rate of the RMB dropped 94 basis points to 6.5376 against the US dollar on March 26, according to the China Foreign Exchange Trade System. At present, the central parity rate of the RMB against the US dollar has been depreciated for three consecutive days, and this week was the pattern of “four falls and one rise”, with a total reduction of 278 basis points.
Source: official website of China Foreign Exchange Trade System
Since March, the yuan has fluctuated against the dollar in both directions. In early March, the onshore renminbi fell below 6.52 to the dollar and the offshore renminbi below 6.55 before both rose. Recently, the US dollar index continued to strengthen, the onshore and offshore RMB/US dollar exchange rates fell again, now both have fallen below 6.5 mark. At the time of writing, the onshore yuan fell 116 basis points to 6.5456 yuan against the dollar. The offshore yuan rose 30 basis points to 6.5453 yuan against the dollar on the day.
Guan Tao, global chief economist at Bank of China Securities, said the dollar index has a significant impact on the yuan’s exchange rate, but cannot fully explain it. Under the baseline scenario of vaccination, epidemic control and global economy restarting, with the US economy rebounding, although the Federal Reserve may not raise interest rates, the marginal convergence of monetary easing and the rise of inflation expectation may still push up the US bond yield and narrow the interest spread between China and the US. Market risk appetite improved, the dollar is expected to further weaken, but the timing and extent of the depreciation of the dollar depends on which major economies after the epidemic recovery faster; If investors’ appetite for risk reverses, global financial markets will again come under pressure and asset prices could easily collapse, testing whether the yuan is a safe haven or a risky currency.
Guan Tao believes that in the case of no big changes in the fundamental equilibrium exchange rate, the factors of appreciation and depreciation are bound to fluctuate one another, resulting in the exchange rate will fall when it rises a lot and rise when it falls a lot, showing a two-way fluctuation of rising and falling. Especially when the exchange rate tends to equilibrium, under the influence of the long and short intertwined factors, it is easy to appear the trend of big ups and downs and big ups and downs.
Earlier, on March 19, deputy director of the State Administration of Foreign Exchange, news spokesman chun-ying wang pointed out that at present, COVID – 19 epidemic is still spreading in the whole world, the external environment of instability are many uncertain factors, but our country economy to good fundamentals have not changed for a long time, high levels of two-way open financial markets continues to advance, help domestic foreign exchange market steady operation, cross-border capital flow equilibrium. (Xin Xin Jingwei APP)