[SMM view] Foreign exchange risk reserve ratio raised to 20 per cent RMB depreciation or will it end?-Shanghai Metals Market

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[SMM view] Foreign exchange risk reserve ratio raised to 20 per cent RMB depreciation or will it end?

Translation 02:20:00PM Aug 06, 2018 Source:SMM
The content below was translated by Tencent automatically for reference.

On the evening of August 3, the central bank said that recently, due to trade frictions and changes in the international foreign exchange market and other factors, there are some signs of pro-cyclical fluctuations in the foreign exchange market. In order to prevent macro-financial risks and promote the sound operation of financial institutions, it was decided to adjust the foreign exchange risk reserve ratio of forward foreign exchange sales from 0% to 20% with effect from August 6, 2018.

On the same day the central bank announced an increase in the foreign exchange risk reserve ratio, the RMB exchange rate rebounded. "View details

(offshore RMB rebounded sharply on the evening of the 3rd)

(Singapore Exchange US dollar / offshore renminbi futures contract UC-09)

On the day the central bank announced the news (9.27 a.m.), the renminbi rebounded slightly day and night before the end of the day and suddenly fell sharply, falling to a 15-month low of 6.8963 at about 10:00. UC-09, a US dollar / offshore renminbi futures contract on the Singapore Exchange, fell as low as 6.8992, its biggest decline since May 31 last year. "[currency interpretation] can the offshore renminbi be preserved by hitting a 15-month low of" 7 "? "

In fact, since April this year, the RMB has been in a state of depreciation, although there have been a few brief recoveries, but the duration is not too long.

(offshore renminbi has fallen sharply in the past four months)

(Singapore Exchange US dollar / offshore renminbi futures contract UC-09)

The central bank, which has not made any big moves for a long time, can not only stabilize the expectations of the RMB, but also warn speculators who want to make an article on the RMB with practical actions at the same time. So this time the central bank will forward foreign exchange sales business foreign exchange risk reserve ratio adjusted from 0 to 20%, how to predict the future market of the renminbi? SMM integrates a variety of points of view for you to interpret.

How to raise the foreign exchange risk reserve ratio of RMB in the future?

Zhang Ming, chief economist of Ping an Securities: the central bank chooses to adjust the foreign exchange risk reserve at this time, which can stabilize market expectations.

Xie Dongming, economist at overseas Chinese Bank in Singapore: this is a strong signal, but it is not a decisive reversal factor. if the depreciation of the renminbi threatens financial stability, the central bank will not sit idly by.

Xie Yaxuan, head of macro research at China Merchants Securities: in the short term, the dollar index is still an important uncertainty, and its volatility around 95 still needs to continue to be concerned.

Xie Feng, researcher at the Institute of International Finance of the Bank of China: management through marketization is an increasingly mature performance of management. Maintaining the basic stability of the renminbi at a reasonably balanced level remains the goal of exchange rate policy, which the central bank is well placed to achieve, and he expects more management measures to be put in place if pro-cyclical behaviour in the foreign exchange market continues.

Wang Youxin, a researcher at the Institute of International Finance of the Bank of China: in fact, the specific location itself does not make much sense, the key is market sentiment. The RMB exchange rate is usually an important indicator for the market to measure China's economic trend. if it drops rapidly to 7 in the short term, it will seriously affect market sentiment, trigger panic capital outflows and foreign exchange purchases, and hit domestic asset prices. And then hit financial stability. Therefore, the important thing is not whether it can "break 7", but the market mood can not be broken.

Huang Zhilong, director of the Macroeconomic Research Center of the Su Ning Institute of Finance: the central bank raised the foreign exchange risk reserve ratio, the main purpose of which is to manage the expectation of further depreciation of the RMB, especially the pro-cyclical factors in the foreign exchange market. Will be effectively suppressed. After the introduction of the central bank's policy, it will increase the cost of funds for forward foreign exchange sales, which will help curb the pressure of further depreciation of the RMB exchange rate, and also shows that the central bank will not ignore the current depreciation of the RMB. Further counter-cyclical adjustment measures may be taken to manage depreciation expectations. There are still more moves by the central bank to adjust the renminbi, he said. for example, the central bank can suppress renminbi short positions in Hong Kong's offshore renminbi exchange rate and manage the movement of the renminbi in the offshore market at less cost. For example, the central bank can provide window guidance to the enterprises and residents of commercial banks to further manage the foreign exchange business. it can also further improve the foreign exchange risk reserve ratio policy and increase the cost of forward foreign exchange sales business. At the same time, the central bank can also re-introduce counter-cyclical adjustment factors to take non-market-oriented management measures for the RMB exchange rate.

[SMM view] Foreign exchange risk reserve ratio raised to 20 per cent RMB depreciation or will it end?

Translation 02:20:00PM Aug 06, 2018 Source:SMM
The content below was translated by Tencent automatically for reference.

On the evening of August 3, the central bank said that recently, due to trade frictions and changes in the international foreign exchange market and other factors, there are some signs of pro-cyclical fluctuations in the foreign exchange market. In order to prevent macro-financial risks and promote the sound operation of financial institutions, it was decided to adjust the foreign exchange risk reserve ratio of forward foreign exchange sales from 0% to 20% with effect from August 6, 2018.

On the same day the central bank announced an increase in the foreign exchange risk reserve ratio, the RMB exchange rate rebounded. "View details

(offshore RMB rebounded sharply on the evening of the 3rd)

(Singapore Exchange US dollar / offshore renminbi futures contract UC-09)

On the day the central bank announced the news (9.27 a.m.), the renminbi rebounded slightly day and night before the end of the day and suddenly fell sharply, falling to a 15-month low of 6.8963 at about 10:00. UC-09, a US dollar / offshore renminbi futures contract on the Singapore Exchange, fell as low as 6.8992, its biggest decline since May 31 last year. "[currency interpretation] can the offshore renminbi be preserved by hitting a 15-month low of" 7 "? "

In fact, since April this year, the RMB has been in a state of depreciation, although there have been a few brief recoveries, but the duration is not too long.

(offshore renminbi has fallen sharply in the past four months)

(Singapore Exchange US dollar / offshore renminbi futures contract UC-09)

The central bank, which has not made any big moves for a long time, can not only stabilize the expectations of the RMB, but also warn speculators who want to make an article on the RMB with practical actions at the same time. So this time the central bank will forward foreign exchange sales business foreign exchange risk reserve ratio adjusted from 0 to 20%, how to predict the future market of the renminbi? SMM integrates a variety of points of view for you to interpret.

How to raise the foreign exchange risk reserve ratio of RMB in the future?

Zhang Ming, chief economist of Ping an Securities: the central bank chooses to adjust the foreign exchange risk reserve at this time, which can stabilize market expectations.

Xie Dongming, economist at overseas Chinese Bank in Singapore: this is a strong signal, but it is not a decisive reversal factor. if the depreciation of the renminbi threatens financial stability, the central bank will not sit idly by.

Xie Yaxuan, head of macro research at China Merchants Securities: in the short term, the dollar index is still an important uncertainty, and its volatility around 95 still needs to continue to be concerned.

Xie Feng, researcher at the Institute of International Finance of the Bank of China: management through marketization is an increasingly mature performance of management. Maintaining the basic stability of the renminbi at a reasonably balanced level remains the goal of exchange rate policy, which the central bank is well placed to achieve, and he expects more management measures to be put in place if pro-cyclical behaviour in the foreign exchange market continues.

Wang Youxin, a researcher at the Institute of International Finance of the Bank of China: in fact, the specific location itself does not make much sense, the key is market sentiment. The RMB exchange rate is usually an important indicator for the market to measure China's economic trend. if it drops rapidly to 7 in the short term, it will seriously affect market sentiment, trigger panic capital outflows and foreign exchange purchases, and hit domestic asset prices. And then hit financial stability. Therefore, the important thing is not whether it can "break 7", but the market mood can not be broken.

Huang Zhilong, director of the Macroeconomic Research Center of the Su Ning Institute of Finance: the central bank raised the foreign exchange risk reserve ratio, the main purpose of which is to manage the expectation of further depreciation of the RMB, especially the pro-cyclical factors in the foreign exchange market. Will be effectively suppressed. After the introduction of the central bank's policy, it will increase the cost of funds for forward foreign exchange sales, which will help curb the pressure of further depreciation of the RMB exchange rate, and also shows that the central bank will not ignore the current depreciation of the RMB. Further counter-cyclical adjustment measures may be taken to manage depreciation expectations. There are still more moves by the central bank to adjust the renminbi, he said. for example, the central bank can suppress renminbi short positions in Hong Kong's offshore renminbi exchange rate and manage the movement of the renminbi in the offshore market at less cost. For example, the central bank can provide window guidance to the enterprises and residents of commercial banks to further manage the foreign exchange business. it can also further improve the foreign exchange risk reserve ratio policy and increase the cost of forward foreign exchange sales business. At the same time, the central bank can also re-introduce counter-cyclical adjustment factors to take non-market-oriented management measures for the RMB exchange rate.