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The US Dollar Index has fallen 1.80% last week
The overseas RMB exchange rate rose above 6.6 for the first time in more than two years.
Guangzhou Daily (All Media Reporter Lin Xiaoli) At the close of last Friday, the US dollar index, which measures the US dollar against six major currencies, fell 0.31% to 92.2369. In the last week, the US dollar index has fallen successively, falling 1.80% in one week. Many market participants believe that the “weak dollar” market has already started and the renminbi is expected to maintain two-way volatility, but to rise steadily.
Many market participants believe the dollar will continue to weaken
The journalist observed that in the last week, the US dollar index rose first and then fell. After voting began on US Election Day, the US dollar index rose for a time, but the gain was hampered afterward.
Regarding the trend of the US dollar exchange rate, market views are not unanimous, but most believe that the “weak dollar” market has started. UBS Wealth Management believes that the US dollar may weaken in the medium term. The scale of US debt may become the focus of the market’s attention and the US dollar no longer has an advantage in interest rate differentials compared to other major currencies.
The US currency trading platform Tempus said on the 6th that due to the improvement in the global market risk appetite this week, the US dollar continued to fall more than 2% and the US dollar index fell to its lowest point since 2018. Considering the strong appetite for market risk, the US dollar may continue to weaken against most currencies.
A financial researcher for a joint-stock bank said that to stimulate the economy, the United States introduced a monetary policy of quantitative easing and zero interest rates, and the fiscal deficit reached an all-time high of more than 15%. In addition, the public debt is high, which will promote the depreciation of the dollar.
The center of fluctuation of the RMB exchange rate may increase to 6.5
The fall in the US dollar exchange rate has also directly contributed to the continued rise in the RMB exchange rate. On November 6, the foreign exchange rate of the RMB against the US dollar rose above the 6.6 mark, the first time since June 2018.
In this regard, Li Chao, chief economist at Zheshang Securities, believes that after the epidemic, China’s economy is the first to recover and China’s fundamentals are relatively dominant in the world; China’s monetary policy has returned to normal, since May the margin has adjusted short-term liquidity and market interest rates have risen. The spread between China and the US has widened and these factors have supported the appreciation of the RMB exchange rate. In addition, there have been other marginal changes recently. First, China’s trade surplus continues to grow and the exchange rate is relatively stable. The interbank foreign exchange market changes in the RMB supply and demand structure, which drives up the RMB exchange rate. Li Chao predicts that there is still room for RMB exchange rate appreciation in the future, and it will continue to increase the center of exchange rate fluctuation to 6.5 from the end of this year to next year, with a fluctuation range of 6.3 to 6.7.
According to data from the China Foreign Exchange Trading Center, in the first three quarters of 2020, foreign institution transactions in the interbank market totaled 33.2 trillion yuan, an 88% year-on-year increase.
In addition, the number of foreign legal entities that participate in the interbank currency and bond markets reached 113 and 552, respectively, and their commercial accounts have represented 10% and 16% of their respective markets. According to analysis by industry experts, more foreign institutions are expected to strategically allocate RMB assets as independent safe-haven assets in the future, and the domestic market is expected to get more incremental funds.
It is also worth noting that on October 12, the People’s Bank of China decided to reduce the foreign exchange risk reserve ratio for forward currency sales from 20% to 0. The central bank stated that the next step will continue to maintain flexibility. of the RMB exchange rate, it will stabilize market expectations and keep the basic stability of the RMB exchange rate at a reasonable and equilibrium level.
