Experts Interpret Three Reasons For RMB's Collapse

In view of the sharp fall of the RMB in early trading today, Professor Tu Yonghong of the school of Finance and finance of Renmin University of China analyzed three reasons for the decline of the renminbi: first, the recent decline in China's export trade; the difference in the export trade affected the trend of exchange rate; and two, the market's falling prices and other market voices led to the escape of profits from capital gains; three, the withdrawal of QE from the US and the backflow of funds.

As of 11:10 Beijing time, the RMB has fallen by 0.9% against the US dollar, breaking through the 6.18 pass and reporting 6.1808. Compared with Thursday's closing price of 6.1284, the value of devaluation has exceeded 500 points. The cumulative drop in the renminbi's spot rate this month is likely to hit the biggest monthly decline since the reform.

Tu Yonghong thinks this time RMB Depreciation is a normal reflection of the market, and it is a signal that the central bank gradually reduces its administrative intervention to the market. There are three reasons for the decline of the renminbi: one is the recent decline in China's export trade, which is in the off-season after the peak of the fourth quarter of last year. export trade The difference has affected. exchange rate On the other hand, the property price wave in the previous period caused market anxiety and produced empty talk of China. Moreover, the capital of investors' early arbitrage is now going to be profitable, coupled with the withdrawal of QE from the US and the return of capital. It can be said that this fall is entirely determined by the market.

She explained that the central bank did not drop from the very beginning, allowing it to last nearly a week. Until the last two days, the market exchange rate dropped to below the daily guidance price set by the central bank. "Breaking some of the one-way bet on the RMB exchange rate, there is a two-way fluctuation, which is the maturity of the exchange rate market." Tu says so.

She added that the central bank's approach is consistent with the exchange rate reform advocated by the central bank. Its purpose is to increase the volatility by increasing the flexibility and flexibility of the market. "Of course, there will be risks, such as the sharp fluctuations in hot money, and the demand for more financial risk management measures by entities and financial institutions, but it also leads to a better market atmosphere."

Tu Yonghong said that this need depends on two factors: first, the first quarter of the macroeconomic data released, if better than the market expectations, then the RMB exchange rate will rise, if not enough or to follow expectations, then the volatility is likely to be large, will also accelerate the outflow of funds, leading to stock market volatility; the other is to see the direction of the European and American currencies, "after all, the RMB has been internationalized".

In contrast to the fact that the renminbi has been rising for more than a week in the past, Tu Yonghong believes that there is no need to worry about the fall of the renminbi. There may be some speculators buying and selling, resulting in short-term fluctuations in the renminbi, but in the long run, it will tend to be stable.

Her prediction is that the future decline of the yuan will probably be maintained at 3-5%, as last year's increase was also about 1-2% per week.