The environment surrounding the RMB is expected to depreciate slowly
2023-07-10
■ After May, because the People's Bank of China did not issue a signal to stop the original depreciation, Yuan deprecation proceeded.
■ The People's Bank of China does not aim at a strong Yuan high conversion, arguing that slow Yuan depreciation is allowed under management.
Following the release of PRESTIA Insight on July 3, "Environment surrounding the RMB (1): The background of the continuous depreciation of the Yuan", we will sort out the trend of the Chinese Renminbi (Yuan). This time, we will introduce the milestones of Yuan depreciation progress after May, as well as the original market forecast for the future.
It can be considered that in the past 2 months, there have been 2 nodes. The first node is seen on May 19 at around 7 per dollar since December 2 last year. On the 20th of the next day, the People's Bank of China issued a statement saying, "Correct unilateral actions if necessary, and curb speculation." Market participants also tend to regard this as a change in attitude towards Yuan depreciation suppression. However, since the next day, the People's Bank of China (hereinafter referred to as the People's Bank) has also set the daily "benchmark value" to the original direction of depreciation, so it cannot be understood as a change in the policy of the People's Bank, and then Yuan depreciation was also carried out.
The second milestone will be June 20 when the loan prime rate (LPR) rate is cut. LPR is regarded as China's "de facto policy rate" in financial markets. This time, one-year goods dropped from 3.65% to 3.55%, and five-year goods dropped from 4.30% to 4.20%. Prior to this, on June 9, the producer price index (PPI) fell to a year-on-year decrease of 4.6% in May, and interest rate cut observations were strengthened. The lowering of the LPR concerns that the pace of recovery of the Chinese economy will slow down, and the authorities' economic stimulus policies are also concerned. However, the financial market interpreted that the rate cut was insufficient, and the U.S. dollar depreciated from the low of 7.18 yuan on June 20 to 7.25 yuan within a week. Observations of further rate cuts continue to be murky.
Since it was originally a "managed floating exchange rate system", in the final analysis, it was influenced by the policy of the People's Bank. However, in the recent situation, (1) the interest rate gap between the United States and China has widened, and (2) there is concern about China's economic recession, so the sense of vigilance against the original depreciation of the US dollar seems to be increasing. What is concern is that since November last year, the depreciation of the Yuan before the 7.3 Yuan depreciation has been carried out. Will the People’s Bank allow it? The depreciation of the Yuan has led to the recovery of the manufacturing industry through the increase in exports. Therefore, the People's Bank does not aim at the transformation of the strong Yuan. Is it allowed to slowly depreciate the Yuan in management? After entering in July, the People's Bank set the "benchmark value" in the direction of high Yuan for five consecutive working days, but it is speculated that it will stay at the goal of slowing down the speed of Yuan depreciation. Under such circumstances, Vice President Pan of People’s Bank was nominated as party secretary on July 1, and the recent appointment as president of the People's Bank has a lot of public calculations. He has been vice president of the People's Bank since 2012 and also has experience with the State Administration of Foreign Exchange (SAFE). Become the key person surrounding the original market in the future.
■ The People's Bank of China does not aim at a strong Yuan high conversion, arguing that slow Yuan depreciation is allowed under management.
Following the release of PRESTIA Insight on July 3, "Environment surrounding the RMB (1): The background of the continuous depreciation of the Yuan", we will sort out the trend of the Chinese Renminbi (Yuan). This time, we will introduce the milestones of Yuan depreciation progress after May, as well as the original market forecast for the future.
It can be considered that in the past 2 months, there have been 2 nodes. The first node is seen on May 19 at around 7 per dollar since December 2 last year. On the 20th of the next day, the People's Bank of China issued a statement saying, "Correct unilateral actions if necessary, and curb speculation." Market participants also tend to regard this as a change in attitude towards Yuan depreciation suppression. However, since the next day, the People's Bank of China (hereinafter referred to as the People's Bank) has also set the daily "benchmark value" to the original direction of depreciation, so it cannot be understood as a change in the policy of the People's Bank, and then Yuan depreciation was also carried out.
The second milestone will be June 20 when the loan prime rate (LPR) rate is cut. LPR is regarded as China's "de facto policy rate" in financial markets. This time, one-year goods dropped from 3.65% to 3.55%, and five-year goods dropped from 4.30% to 4.20%. Prior to this, on June 9, the producer price index (PPI) fell to a year-on-year decrease of 4.6% in May, and interest rate cut observations were strengthened. The lowering of the LPR concerns that the pace of recovery of the Chinese economy will slow down, and the authorities' economic stimulus policies are also concerned. However, the financial market interpreted that the rate cut was insufficient, and the U.S. dollar depreciated from the low of 7.18 yuan on June 20 to 7.25 yuan within a week. Observations of further rate cuts continue to be murky.
Since it was originally a "managed floating exchange rate system", in the final analysis, it was influenced by the policy of the People's Bank. However, in the recent situation, (1) the interest rate gap between the United States and China has widened, and (2) there is concern about China's economic recession, so the sense of vigilance against the original depreciation of the US dollar seems to be increasing. What is concern is that since November last year, the depreciation of the Yuan before the 7.3 Yuan depreciation has been carried out. Will the People’s Bank allow it? The depreciation of the Yuan has led to the recovery of the manufacturing industry through the increase in exports. Therefore, the People's Bank does not aim at the transformation of the strong Yuan. Is it allowed to slowly depreciate the Yuan in management? After entering in July, the People's Bank set the "benchmark value" in the direction of high Yuan for five consecutive working days, but it is speculated that it will stay at the goal of slowing down the speed of Yuan depreciation. Under such circumstances, Vice President Pan of People’s Bank was nominated as party secretary on July 1, and the recent appointment as president of the People's Bank has a lot of public calculations. He has been vice president of the People's Bank since 2012 and also has experience with the State Administration of Foreign Exchange (SAFE). Become the key person surrounding the original market in the future.