The onshore RMB fell below 6.5 in nearly seven months, down more than 2% in a single week. Accordingly, the A-share and bond markets were significantly adjusted.
Back to the definition of exchange rate, the price ratio between two different currencies is the exchange rate, but from the perspective of influencing factors, it is not so simple. The influencing factors of exchange rate include balance of payments (the main factor of exchange rate trend, the balance of payments surplus will drive the appreciation of local currency and the depreciation of foreign currency), interest rate (the interest rate increase of a country’s currency is expected to attract foreign capital inflow), inflation (in the purchasing power parity theory, inflation slows down and the exchange rate of local currency rises) The intervention of monetary authorities (the central government acts to maintain the stability of the economy and the external market, intervenes in the market according to the trend of the local currency, and affects the change of exchange rate through foreign exchange trading), macro policies of various countries, market sentiment, etc. In this article, we understand the recent performance of exchange rate from the perspective of import and export trade.
After the 8-11 foreign exchange reform, the consistency between the RMB exchange rate and export trade has become more and more obvious. Since August 2015, the correlation coefficient between the two is 0.74.
Looking back, from the perspective of trade, the RMB may continue to depreciate. As of March, exports still maintained high growth, but the price factor was the main contribution. With the gradual return of the global production and consumption structure distorted by the epidemic, the gap between overseas supply and demand has gradually converged, the production in emerging markets has been repaired, and exports are facing the dual risk of falling in total volume and share. The slowdown of export scale will be accompanied by the slowdown of RMB appreciation. If the export scale continues to slow down to negative growth, the RMB will continue to depreciate from the perspective of trade.
Risk tips: escalation of geographical conflicts, repeated and large-scale recurrence of the epidemic, changes in overseas relations, etc.
