Back on August 11, 2015The exchange rate of the renminbi against the US dollarIt was a historic correction with the largest one-day drop in 20 years. At the time, there was widespread apprehensionRMBThere will be a further depreciation, and even someone **RMBwill fall below the threshold. However, the years have flown by, six years have passed, and nowRMBWe were pleasantly surprised. Recently,RMBGloballyMoney marketThe performance has attracted a lot of attention. EspeciallyThe exchange rate of the renminbi against the US dollarIt has achieved a significant reversal, accumulating** more than 2,000 points in November this year, and successfully surpassed the euro, ranking second in the worldCurrency, second only to the US dollar. How did this happen?WhyRMBWill it be so large?
RMBExchange rate reversal is the result of a combination of factors. Among them, the most important factors are:Balance of paymentsstatus, i.e. a country'sForexThe difference between income and expenditure. In general,Balance of payments surplus, ieForexRevenues outweigh expenditures, which leads to the countryCurrencyappreciation;On the contrary,Balance of paymentsdeficit, ieForexRevenues are less than expenditures, resulting in the countryCurrencyDepreciate. According to ChinaForex tradingData from the center, the first 10 months of 2023, our countryBalance of payments surplusReached 1$2 trillion, a record high. This is mainly due to the strong recovery of China's economy and the rapid growth of exportsForexThe steady increase in reserves, the continuous inflow of foreign capital, and the "dual circulation" strategy actively promoted by China have increased the proportion of domestic consumption and investment, and reduced the dependence on external demand. These factors are strengthenedRMBofSupply and demand, pushedRMBExchange rate of **.
The level of interest rates is another important influencing factor, i.e., a country'sMonetary policyand borrowing costs. In general, the level of interest rates is high, ieMonetary policytightening, will lead to the countryCurrencyappreciation;On the contrary, the level of interest rates is low, ieMonetary policyLoose, will lead to the countryCurrencyDepreciate. This is because the high level of interest rates can attract domestic and foreign capital inflows and increase the domestic capitalCurrencydemand;Low interest rates will lead to outflows and reduce the country's capitalCurrencydemand;According toPeople's Bank of Chinadata, the first 10 months of 2023, the one-year period of our countryDeposit interest ratesKeep it at 15%, while the federal interest rate in the United States is from 025% to 125%, ECB'sDeposit interest ratesthen from -05% to -075%。This means that compared with the United States and Europe, China's interest rate level has a clear advantage, so thatRMBAssets are more attractive for investment, increasingRMBdemand, drivenRMBExchange rate of **.
In addition,U.S. dollar indextooRMBAn important reason for the reversal of the exchange rate, that is, the dollar against the basket of mainlyCurrencyexchange rate. In general,U.S. dollar indexHigh, i.e. the strength of the dollar, leads to othersCurrencyRelative depreciation;On the contrary,U.S. dollar indexLow, i.e. the weakness of the dollar, leads to othersCurrencyRelative appreciation. This is because the US dollar is the world's most important international reserveCurrencyand settlementCurrency, which will affect global capital flows andRisk appetite。According to the U.S. Department of Commerce, in the first 10 months of 2023, economic growth in the U.S. slowed, inflation rose, fiscal deficits widened, and political divisions intensified, which undermined confidence in the dollar, resulting in:U.S. dollar indexFrom 97 at the end of 20225** to 88 in November 20235, a new low in nearly 10 years. This means that the weakness of the dollar makes the otherCurrencyRelatively more valuable, added othersCurrencydemand, driving the otherCurrencyExchange rate of **.
First of all,RMBAppreciation is conducive to reducing the cost of imports and increasing the value of domestic residentsPurchasing powerand welfare levels. Due toRMBappreciation, means useRMBPurchaseForexThe cost is reducedImported goodsKimonoThe relative decline of the ** of the service. This is a good thing for domestic consumers, who can buy more foreign goods with less moneyKimonoservices, such as imported food, clothing, electronics and travel services. This can improve their quality of life and well-being.
Secondly,RMBAppreciation is conducive to reducing domesticProduction coststo improve the competitiveness and profitability of domestic enterprises. Due toRMBappreciation, useForexPurchaseRMBThe cost of exporting goods increasesKimonoThe relative rise of the service **. This is bad for foreign consumers, who need to spend more money on fewer Chinese goodsKimonoservices, for example, ChinaIndustrial products, agricultural products and manufactured products. This will reduce their demand for these products. Domestic export enterprises are facing the pressure of declining export revenues, and need to improve product quality and reduce itProduction costsand open up new markets to improve competitiveness. This will help promote the structural adjustment and upgrading of domestic enterprises and improve the efficiency and quality of the overall economy.
Again,RMBAppreciation is conducive to reducing inflationary pressure on imports and maintaining price stability. Due toRMBappreciation;Imported goodsThe relative decline of **, which can reduce the pressure of import inflation and help maintain price stability. This is good news for domestic residents and businesses to protect themPurchasing powerand profitability.
Finally,RMBAppreciation also brings with it some challenges and risks. First of all,RMBAppreciation is likely to increase domestic firmsForexThe cost of debt, especially for businesses that borrow dollars. Due toRMBappreciation, useRMBReimbursement of US dollarsDebtThe relative increase in costs has increased the debt repayment pressure of enterprises. Secondly,RMBAppreciation could weaken the profitability of exporters, leading to a slowdown in employment and economic growth in related industries. Finally,RMBAppreciation could trigger pressure on capital outflows, especially for the withdrawal of short-term hot money, rightFinanceThe impact of stability and exchange rate markets needs to be closely watched and managed.
In summary,RMBThe reversal of the exchange rate and the reversal of the exchange rate have brought a series of effects at home and abroad. AlthoughRMBAppreciation comes with some challenges and risks, but overall,RMBThe reversal of the exchange rate is positive and beneficial to domestic consumersPurchasing power, reduce the domestic enterprisesProduction costs, reduce inflationary pressure on imports, maintain price stability, etc. This is of positive significance for the steady and healthy development of China's economy.