SMM News: June 20, the dollar continued to collapse model, non-U. S. currencies have risen sharply against the dollar. The renminbi was not left behind and opened only slightly higher in the morning, but continued to strengthen during the day, breaking five hurdles in daytime trading and closing up more than 500 points. Analysts point out that the favorable factors facing the RMB are increasing, and the room for further rise remains to be seen, but the risk of devaluation has converged significantly.
A basin of water from the Federal Reserve to cool the dollar
On June 20, the yuan rebounded sharply against the dollar since it adjusted in April.
On the morning of the 20th, the RMB / US dollar spot inquiry trading opened at 6.9024 yuan in the interbank foreign exchange market, which was only 16:00 higher than the previous closing price, and soon rose above 6.90 yuan after the opening session. It closed at 6.8505 yuan at 16:30, up 535 points, or 0.77 percent, from the previous close, the biggest one-day gain in more than six months.
On the 20th, the offshore renminbi hit a new high of more than one month at the same time. As of 16-30 on the 20th, the spot exchange rate of the renminbi against the US dollar in Hong Kong was as high as 6.8492 yuan, the latest at 6.8543 yuan, up 401 points from the previous closing price.
The rebound came suddenly, but not alone. Over the past two days, non-US currencies have risen sharply against the dollar, while the dollar index has tumbled one after another. On the 19th, the dollar index fell 0.4 percent to 97.26; on the 20th, as of 16-30 Beijing time, the dollar index fell another 0.57 percent to 96.71, a one-week low. In intraday trading on the 20th, the euro rose above 1.13 against the dollar at one point, and rose nearly 1% on the two days.
After a two-day interest rate meeting in the early hours of the 20th Beijing time, the Federal Reserve announced that it would keep interest rates unchanged but hinted that it might cut interest rates this year. Markets are confident that the Fed is getting closer to cutting interest rates, US bond yields have already continued to fall and the dollar is under increasing downward pressure.
The favorable factors of RMB increase
At present, the favorable factors facing the renminbi are increasing, and it may be too early to say that the renminbi will launch a large rebound, but at least the risk of devaluation has converged sharply.
First of all, with the release of the "dove" by the Federal Reserve, signs of a slowdown in the US economy have increased, gradually shaking the foundation for the dollar to remain strong, and the downside risk of the US dollar has increased. Historically, the RMB exchange rate against the dollar and the dollar index have shown a "seesaw" trend most of the time. If the US dollar is stronger, the RMB will be under pressure against the US dollar; if the US dollar is weak, the RMB will be stronger against the US dollar.
Secondly, under the situation of competitive easing in developed economies, the space for China's macro policy to move is widening, which is conducive to better support for economic growth, so as to provide fundamental support for the RMB exchange rate.
In addition, due to the faster decline in yields in the overseas bond market, the current level of interest rate differentials between China and the United States has returned to a higher position. For example, the yield on 10-year Chinese and US Treasuries has exceeded 120 basis points, and the attraction of Chinese bonds to foreign investment continues to highlight. The trend of foreign capital flowing into China's equity bond market is expected to continue, and it is also conducive to the steady operation of the RMB exchange rate.
Finally, the foreign exchange counter-cyclical policy provides a strong backing for the RMB exchange rate, so that the risk of RMB devaluation has always been at a controllable level. The people's Bank of China (PBOC) will issue two issues of RMB central bank notes totaling 30 billion yuan in Hong Kong on the 26th, the fourth time the central bank has issued RMB central bank notes in Hong Kong, helping to support the offshore RMB exchange rate and stabilize expectations in the foreign exchange market.
Traders said that the internal and external environment facing the renminbi has improved, but in June and July in the traditional foreign exchange buying season, subsequent exchange rate movements may still fluctuate, short-term room to continue to rise in line with the performance of the dollar, the market focus is turning to next week's G20 summit.
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