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Summary: China's foreign currency exchange rate lowers US-US trade deficit by three times in October | Reuters China


Reuters, Beijing, November 22 – Renminbi against the US dollar dropped sharply in October and dropped for more than 10 years, but China's currency accounts for the counter-cyclical exchange rate dropped three months, but the decline was lower than in September. In October, together with good-selling and good-selling data, it indicates that the central bank has made certain transactions in the currency market and its effect is clear.

Profile image: January 2016, Beijing, US Dollars and RMB banknotes. REUTERS / Jason Lee

However, China-US trade and the narrowing of the trade pressure on transboundary capital flows and the RBM exchange rate. According to experts, the purpose of stabilization of the exchange rate is the direct intervention, countercyclical factors, etc. but the future will depend on new variables, such as the Fed's interest rate ratios.

"My common sense is that there is a restriction … the central bank will have a little protection at the basic moments," said chief economist Commerzbank China Zhou Hao.

According to the data released by the People's Bank of China on Thursday, the foreign currency holdings of the central bank fell to 91.576 billion yuan in October and declined for the third consecutive month, but its decline was less than last month's figure of 111.9 billion yuan.

Xie Yahuan, chief researcher at China's Merchants Securities and researcher Lyn Biao, noted that the US dollar index rose to 97 percent in October, up from 2.03 percent, and the RBC's exchange rate fell 1.34 percent, which played an important role in central bank direct intervention , and the central bank was still in the currency market. This intervention was awaited.

They believe that in October, the situation on supply and demand in the Chinese currency market has sharply decreased and the deficit in foreign exchange earnings and payments has fallen sharply, and the continuing volatility of forward contracts may be limited by an increase in foreign exchange risk reserves.

In October, the change in the central bank's currency holdings was largely due to the fact that the central bank's foreign currency holdings decreased by 91.576 billion yuan and exceeded $ 10 billion, while the foreign currency reserves of Merchants Securities in China decreased by $ 33.9 billion. Exchange rate fluctuations and asset price fluctuations, actual trade factors – 16.1 bln. This is mainly the two rapprochement.

At the end of October, China's foreign exchange reserves amounted to 3.533.1 billion tenge. Down from April to April 2017, reaching the lowest level since April 2017, compared with $ 339 billion at the end of the previous month. Meanwhile, the representative of SAFE said that China's foreign exchange reserves remain stable during the volatility.

The chief financial analyst of the Telecommunications Bank, E-Yunzhen, reported that the current account deficit and sales deficit considerably dropped from the data on settlement and sale of foreign currency and the current account surplus and sales surplus resulted in a relatively stable current account surplus. .

The accumulated deficit for the past 10 months was $ 31 billion, down 72 percent from the same period last year and dropped by 83 percent to US dollar.

** China-US trade and distribution have been dropped and the pressure is on

In October, data on foreign currency, foreign reserves and foreign currency depreciation showed that transboundary capital flows were fluctuating but under common control over the depreciation of RBC. The expectations of the Fed on interest rates have led to a decline in China-US distribution, while the development of the US-China trade war is uncertain.

Recently, the RMB exchange rate fluctuation range is relatively narrow, and the market expects that the G20 (G20) summit at the end of this month can provide guidance on the prospects for trade in the China-US summit, which may have an impact on the average and long-term currency rates.

However, despite the resilience of the financial market risk appetite, many market participants are not optimistic about the prospects of China-US negotiations, but the Chinese government may face greater stability to support exchange rates and maintain cross-border capital flows. . Call.

"While the Chinese-American talks are not as smooth as expected, it is unlikely that the United States will start a price reduction response to tariff measures, of course, the dollar will be much stronger, and the declining fall should be seen as a market action." .

On the other hand, the Sino-US spread continued, while the US one-year Sino-US spread was negative, which also exacerbated transboundary capital outflows and could potentially hamper the RBM exchange rate stability.

China's latest Merchants Securities report says China's annual United States spread continues to decline, triggering new uncertainty in the RMB trend. The central bank can substitute interest rates with direct interest in the actual transaction, but the continuing tightening and even decline of the US-US distribution is still important.

"This will have a significant negative impact on the attraction of foreign investments to attract foreign investments and will further undermine the flow of Chinese capital, as well as the deterioration in foreign exchange demand and demand and pressure on the exchange rate," the statement said.

However, recently the supply and demand indicators in the foreign exchange market have deteriorated considerably. Presently, the situation on supply and demand in the Chinese currency market is still not optimistic; the Asian emerging market capital inflows are weak, and China's outer environment is still absent. capital exhaustion pressures remain. (End)

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