On December 14, the spot exchange rate of the renminbi against the US dollar** rose by 535 points to 71,301 yuan, a new high since November 29. Market participants pointed out that the Federal Reserve released a signal overnight, and the extent exceeded expectations, the dollar index fell significantly, and the yuan followed the non-US currencies.
However, there are still many uncertainties about the path of the Fed's interest rate cuts in the future, and the expected difference between the strong United States and the weak Europe supports the dollar index, and the RMB will still maintain a two-way fluctuation trend.
The U.S. dollar index fell sharply, and the yuan took advantage of the trend**.
In the early morning of the 14th, the Federal Reserve's latest decision showed that the federal ** interest rate would be maintained at 525%-5.The 5% range remains unchanged. Subsequently, Fed Chairman Jerome Powell released a rare dovish signal, indicating that the tightening cycle may be over and interest rate cuts have been considered, which means that the Fed basically confirms the monetary policy pivot, and the loose monetary policy will start next year, and the dot plot predicts that the Fed will have three interest rate cuts in 2024.
Driven by this news, the dollar index came under pressure and fell sharply. Market risk appetite rebounded, non-US currencies were obvious**, and the offshore RMB exchange rate against the US dollar appreciated rapidly by more than 500 basis points during the session.
Fan Ruoying, a researcher at the Bank of China Research Institute, said in an interview with a Shell financial reporter that the exchange rate of the RMB against the US dollar on the 14th showed a relatively large **. The main reason is that the Fed's interest rate meeting statement is "dovish", the meeting dot plot shows that interest rates may be cut three times next year, and Powell also said that "interest rate cuts have entered the field of vision". At present, the market has basically determined that the Federal Reserve has ended its interest rate hikes, and the expectation that the Fed will start to cut interest rates next year has risen, driving the dollar index down sharply, and the depreciation pressure on non-US currencies has been significantly reduced. At the same time, seasonal demand has also contributed to the appreciation of the renminbi. At the end of the year and around the Spring Festival, exporters often need to settle foreign exchange to pay wages, etc., so the demand for foreign exchange settlement increases.
Che Meichao, a foreign exchange analyst at Yide**, told the Beijing News Shell Finance that the short-term weakening of the dollar index and the further narrowing of the interest rate gap between China and the United States have significantly reduced the external depreciation pressure of the RMB. The exchange rate of the US dollar against the renminbi may remain at 7 during the year1. First-line**, the market price continues to move closer to the middle price.
There is still uncertainty about the path of the Fed's interest rate cuts, and the RMB exchange rate will still fluctuate in both directions in the future.
However, Che Meichao believes that the external depreciation pressure of the RMB exchange rate still exists in the medium term. Looking forward to the future monetary policy of China and the United States, the inflation rate in the United States has not yet fallen to the target of 2%, there is still a lot of uncertainty in the path of the Federal Reserve's interest rate cuts, and the expected difference between the strong and weak expectations of the United States and Europe supports the dollar index. In addition, the confidence of domestic entities still needs to be boosted, and it is not ruled out that further consideration of RRR cuts and other means to stabilize the expectation of credit easing, so it is expected that the inversion of the interest rate differential between China and the United States will continue in the first quarter of next year.
Fan Ruoying said that in the future, the RMB will still maintain a two-way fluctuation trend, and the probability of further stabilization and recovery is high. The U.S. dollar index is likely to continue to fall at a high level in the future. This round of strong dollar cycle was formed under the support of the post-epidemic recovery of the US economy and the continued interest rate hikes of the Federal Reserve. In the future, as the inflationary pressure in the United States slows down and the downward pressure on the U.S. economy increases, the Federal Reserve is already at the end of the monetary tightening cycle, and the dollar is likely to usher in a strong and weak cycle.
The stable operation of China's macroeconomic economy is fundamental to the stability of the RMB exchange rate. With the implementation of a series of policies to stabilize growth, China's economic recovery is expected to maintain a stable and positive trend, giving strong fundamental support to the RMB exchange rate.
Recently, the ** Economic Work Conference also clearly pointed out that "to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level". It is expected that in the future, the guidance and management of foreign exchange market expectations will be strengthened, foreign currency liquidity management will be strengthened, and the reserve of the exchange rate stabilization toolbox will be further improved.
Du Zhengzheng, a macroeconomic analyst at China Development Bank, pointed out that in 2024, with the probability of narrowing the interest rate gap between China and the United States and the probability of falling in the second half of the U.S. economic growth, the bilateral exchange rate of the RMB against the US dollar may rise, and the market sentiment may be more inclined to expect the appreciation of the RMB.
Tao Chuan, chief macro analyst of Soochow, believes that looking forward to 2024, there are three basic judgments on the RMB: one is that it will appreciate moderately throughout the year;The second is that according to the normal rhythm, the depreciation pressure in the first half of the year will be greater, and the third is that the overall rhythm shows the characteristics of "high at the beginning of the year and the end of the year, low in the middle", and may rise above 7 in stages.
From the market dimension, the decline of the US dollar determines the basic direction of the RMB. It is expected that the center of the dollar index will decline in 2024 compared to 2023, but there will be no trend depreciation. The pace of interest rate cuts between China and the United States will become an important factor affecting the phased appreciation and depreciation of the RMB.
Beijing News Shell Financial Reporter Zhang Xiaochong.
Edited by Yue Caizhou.
Proofread by Liu Baoqing.