21st Century Business Herald reporter Ye Maisui reported in Guangzhou On the morning of December 5, both the offshore renminbi and onshore renminbi surged above 7, an increase of more than 500 points, reaching a new high since September. As of press time (11:16am), USD/CNH was temporarily reset to 6.9549, down 1.01%, and USD/CNY was temporarily reset to 6.9638, down 0.86 %.
Liu Youhua, deputy director of wealth research department at Paipai.com, told the 21st Century Business Herald that there are two main reasons for the RMB to rise above 7:
First, the recent continued favorable domestic policies have greatly increased market confidence in China’s economic recovery, thus playing a very good role in supporting the strengthening of the RMB;
Second, in the expectation that the Fed will slow down interest rate hikes, the US dollar may enter a declining channel and the corresponding RMB will usher in appreciation. However, the real strengthening of the RMB exchange rate may have to wait until next year, when China’s economic recovery is highlighted and the end of the Fed’s interest rate hike cycle is confirmed.
In addition, some analysts believe that foreign capital has bought Chinese assets from below, which has led to an increase in demand for RMB; at the end of the year, the demand for foreign exchange settlement by foreign trade companies increased, which also pushed up the gradual valuation of the RMB exchange rate.
Federal Reserve Chairman Powell delivered the last speech before the interest rate meeting, on the theme “Inflation and the labor market,” which addressed the Fed’s most worrying indicators. He confirmed that the pace of interest rate hikes rate will be slowed as early as December to reduce the risk of excessive tightening, but also repeatedly stressed that housing and services-driven inflation is too high, suggesting that tightening interest rates will last longer and the end point will be higher to 9 monthly forecasts. Powell’s speech was interpreted by the market as dovish, so the US dollar index and US bond yields fell.
CME “Fed Watch”, the probability of the Fed raising interest rates by 50 basis points in December in the range of 4.25%-4.50% is 77%, and the probability of raising interest rates by 75 points basis is 23%; the probability of raising interest rates by 75 basis points in February next year The probability of a cumulative rate increase of 100 basis points is 46%, and the probability of a cumulative rate increase of 125 basis points is 9, 8%. In the context of the current Fed rate hike cycle, interest rate futures market expectations for the top interest rate have fallen from the previous 5%-5.25% to 4.75%-5% .
The high-intensity interest rate hike ended and the US dollar index adjusted sharply. On November 30, the US dollar index fell by 0.78% on the last trading day of the month. As the full trading month ended, the US dollar index overall fell 5.02% in November, posting its worst monthly performance in 12 years. Since the US dollar index reached its highest point this year on September 28, the US dollar index has fallen rapidly by more than 8%.
December has just started and the US dollar index also continued its downtrend, falling 0.51% on 1st (3.30pm). The current quote is around 105.6, testing the support of 105 points.
US dollar speculators’ net short positions rose to the highest level since July 2021 in the past week, according to data released by the US Commodity Futures Trading Commission (CFTC) on Monday (November 29). The net short position of the dollar reached $1.82 billion in the week ending Nov. 22, compared with a net short position of $10.5 million the previous week. Speculators have been clearly shorting the dollar for the second week in a row.
The chief economist of CITIC Securities (20.810, 0.98, 4.94%) clearly believes that the current trough of the RMB spot exchange rate against the US dollar may have been confirmed and the probability that the exchange rate of the RMB maintains a wide range of short-term volatility is relatively high. In the long term, the RMB exchange rate valuation trend in the future will gradually be dominated by the fundamentals of steady growth of the domestic economy.
(edited by: Wen Jing)
