After the outbreak of the conflict between Russia and Ukraine, the RMB initially showed the characteristics of a safe haven currency, but it was only an atypical safe haven currency.
Safe haven currency refers to the currency that global investors choose to avoid risks or appreciate when the uncertainty of economic fundamentals increases. Before and after the periodic high of VIX Index since 1990, the dollar index mainly rose at the high point of market panic, the risk aversion attribute of the yen was significantly stronger than that of the Swiss franc, while emerging market currencies including RMB showed obvious risk attribute.
On February 24, after the outbreak of the conflict between Russia and Ukraine, market panic intensified, and global funds fled to safe assets, driving the rise of US debt and gold prices, the rise of US dollar index, and the sharp decline of euro and Sterling as scheduled. However, the RMB exchange rate unexpectedly strengthened, showing a certain safe haven currency attribute.
From the perspective of theoretical influencing factors, a country's stable economic and political environment, strong currency liquidity and long-term low interest rate environment are the main influencing factors of currency hedging attribute. From the perspective of the actual appreciation mechanism, the core of the US dollar's safe haven appreciation lies in the role of the United States as a safe haven, which is often manifested in the "double rise of debt and foreign exchange"; The hedging and appreciation mechanism of yen and Swiss franc is mainly the closing of carry trade and the self realization of appreciation expectation.
China's stable macroeconomic environment is an important basis for maintaining the stability of RMB purchasing power, but it is different from the United States, Japan and Switzerland in terms of financial market development, financial openness and interest rate level. After the conflict between Russia and Ukraine, although the RMB began to have the characteristics of a safe haven currency, the RMB bonds lacked the attribute of safe assets.
Whether RMB assets can become safe haven assets depends on whether the relevant risks are advantages or disadvantages for China. If China can be protected from risks or less affected by risk events, RMB may become a safe haven asset; But if China is involved, it will be difficult for the RMB to become a safe haven asset.
Risk tip: the geopolitical situation exceeded expectations, the monetary tightening of the Federal Reserve exceeded expectations, and the development of the epidemic in China exceeded expectations.
