November 30, 2021
On November 29, the Central Bank authorized the China Foreign Exchange Trade System to announce that based on the 6.4854 quotation of the RMB against the US dollar on September 30, the RMB exchange rate rose by nearly 1,000 basis points as a whole between October and November. The onshore and offshore RMB exchange rates against the US dollar also performed strongly. On November 29, Wind data showed that the offshore renminbi rose short-term against the US dollar, breaking the 6.39 mark. As of 16:30 on November 29, the onshore renminbi was quoted at 6.3846 against the US dollar, and the offshore RMB was quoted at 6.3853 against the US dollar.
Since 2021, the RMB exchange rate has risen and depreciated, showing two-way fluctuations. It once appreciated to 6.3572 in June, and then fluctuated around 6.45. After entering the fourth quarter of 2021, the RMB exchange rate and the U.S. dollar index (96.1590, -0.0150, -0.02%) have strengthened at the same time, and the RMB exchange rate has appreciated significantly, with the highest appreciation in November reaching 6.3803.
Regarding the appreciation of the renminbi despite the strength of the US dollar, the main reason is that external demand continues to increase under the continued impact of the global epidemic. The substitution of Chinese products for foreign demand is still low, and the price elasticity of products is small, supported by exports. There are more foreign exchange settlements, and the market has a greater demand for RMB, and the RMB exchange rate remains strong. At the same time, the Fed's reduction of debt purchases is still far from the large-scale tightening of monetary policy, and at least it will not suppress the current renminbi in the short term.
On the other hand, in response to the recent performance of the RMB exchange rate, the central bank has successively emphasized strengthening the management of RMB expectations. The Eighth Working Conference of the National Foreign Exchange Market Self-discipline Mechanism pointed out that the current global economic and financial situation is complex and changeable. The monetary policies of the central banks of major economies have begun to adjust. There are many factors affecting the exchange rate. In the future, the RMB exchange rate may appreciate or depreciate, and fluctuate in both directions. It is normal, reasonable balance is the goal, and the degree of deviation is proportional to the correction force.
The meeting pointed out that market entities such as enterprises and financial institutions can better respond to external shocks only if they adhere to the risk-neutral concept. Enterprises must deeply understand and understand the neutral connotation of exchange rate risk, and adhere to the exchange rate risk management principle with "preservation" rather than "value added" as the core. Financial institutions should actively provide exchange rate hedging services for small, medium and micro enterprises to reduce their exchange rate hedging costs.