The RRR cut means that the renminbi appreciates or the renminbi depreciates

Depreciate. On the second trading day after the announcement of the RRR cut, the RMB exchange rate appeared. However, after the announcement of the RRR cut in early January this year, the renminbi not only did not depreciate, but appreciated - a very important reason is that the divergence of monetary policies between China and the United States tends to converge, and the Fed's interest rate hike expectations have weakened.

The exchange rate is a relative concept, and it depends not only on what happens to you, but also on what happens internationally. Guan Tao said, "Now the Federal Reserve has pressed the pause button on the normalization of monetary policy, which has opened up a certain space for China's monetary policy." However, this does not mean that China's central bank must take measures to cut the reserve requirement ratio and interest rates.

China's monetary policy still takes into account the domestic economic situation, and depends on economic growth, inflation, and employment. ”

Regarding the exchange rate trend, Guan Tao said that since 2019, the pressure of RMB depreciation has subsided significantly. According to the data, as of March 15, the U.S. dollar index appreciated, and the central parity of the RMB exchange rate accumulated ** in the same period. Judging from the deviation of the ** price from the middle price, the depreciation pressure of the RMB has subsided, but it has not turned into an appreciation trend.

Theoretically speaking, factors such as China's economic stabilization, dollar consolidation, and the improvement of Sino-US negotiations have supported the RMB exchange rate. But actually, if you put it under the framework of the pricing formula of the central parity of the RMB exchange rate, you find it difficult to find [those factors]. Since the beginning of this year, the RMB exchange rate has stabilized, and in many cases it is the result of countercyclical adjustment.

Guan Tao said. For this year's exchange rate trend, Guan Tao believes that it will be affected by a variety of factors: Sino-US economic and trade relations are facing a turnaround but there is also great uncertainty, China's economy continues to face downward pressure, the direction of China-US monetary policy is uncertain, and the trend of the US dollar is highly uncertain.

In 2019, the RMB exchange rate will maintain the best trend. Two-way fluctuations in exchange rates and divergent market expectations are conducive to the independent balance of payments. In the case of uncertain exchange rates, I suggest that you should not bet on policies and directions, and as market players, you should establish an understanding of financial neutrality and risk neutrality, and manage and control currency exposure and risks.

Guan Tao concluded.

The RRR cut is one of the means of monetary easing, which lowers the reserve requirement of commercial banks in the central bank and increases the amount of funds circulating in the market, that is, the depreciation of the renminbi.

The exchange rate of the renminbi will continue**.

The main reason for this is that our central bank did not choose to raise interest rates at the same time, and when the Fed raised interest rates further, our central bank cut interest rates further. Because the dollar itself has a certain settlement status, the Fed's interest rate hike means that the dollar index will further strengthen, and it also means that the currencies of other countries and regions will further weaken. In this case, the exchange rate of the renminbi may even break through the mark, which not only means that the renminbi will depreciate significantly, but also means that we need to look at the issue of currency purchasing power with a dynamic vision.

What's going on here?

This is about the impact of the Fed's interest rate hikes, which have reached around the exchange rate of the renminbi against the US dollar after the Fed chose to cut interest rates by 75 basis points. Before that, we need to know that the exchange rate of the renminbi will basically stabilize around the right, so the depreciation rate of the renminbi is indeed a bit fast, and many people are very stunned by this. <>

The exchange rate of the renminbi will continue**.

Because our economic cycle is not directly related to the economic cycle of the dollar itself, inflation in the United States reached 8% to 10% before the Fed chose to raise interest rates. But for our domestic economy, because our domestic inflation is basically stable and controlled within 3%, we don't need to deal with inflation by raising interest rates at all. In this case, if the Fed raises interest rates further, the exchange rate of RMB against the US dollar will be further **, so we need to be mentally prepared accordingly in advance.

Finally, I personally think that not all countries will choose to raise interest rates in tandem with the dollar, especially when a country or region is more focused on economic recovery, the way to cut interest rates will be conducive to economic recovery, and the behavior of raising interest rates will lead to a recession.

Categories: Business Banking.

Analysis: The impact of RMB appreciation.

Positive impact·1. Conducive to China's imports.

2. The cost of raw material import-dependent manufacturers has decreased.

3. The ability of domestic enterprises to invest abroad has been enhanced.

4. The profits of foreign investment and deferred capital allocation enterprises in Huinamenghua have increased.

5. It is conducive to the study and training of talents abroad.

6. The pressure on repaying principal and interest on foreign debts has been reduced.

7. It is more cost-effective to sell Chinese assets.

8. The international status of China's GDP has improved.

9. Increase state tax revenue.

10. The international purchasing power of the Chinese people has increased.

1. The RMB is not freely convertible under the capital account, that is to say, the mechanism for determining the exchange rate is not the market, and there is no point in changing it.

2. The appreciation of the RMB will bring greater pressure to China's deflation 3. The appreciation of the RMB exchange rate will lead to a decrease in the attractiveness of foreign investment and reduce foreign direct investment in China;

4. It has caused great harm to China's foreign trade exports.

5. The appreciation of the RMB exchange rate will reduce the profit margin of Chinese enterprises and increase the pressure on employment6. The fiscal deficit will increase due to the appreciation of the RMB exchange rate, and at the same time affect the stability of monetary policy.

RMB appreciation: It is relative to other currencies, that is, the purchasing power of the RMB increases. The reason for the renminbi's appreciation is due to internal dynamics in China's economic system and external pressures.

Internal influencing factors include the balance of payments, foreign exchange reserves, price and inflation, economic growth and interest rates.

RMB depreciation:

Currency depreciation (also known as currency depreciation) is the symmetry of currency appreciation, which refers to the decline in the value contained in or represented by a unit of currency, that is, the decline of a unit of currency**.

Advantages: 1. It is conducive to China's imports.

2. The cost of raw material import-dependent manufacturers has decreased.

3. The ability of domestic enterprises to invest abroad has been enhanced.

4. The profits of foreign-invested enterprises in China have increased.

5. It is conducive to the study and training of talents abroad.

6. The pressure on repaying principal and interest on foreign debts has been reduced.

7. It is more cost-effective to sell Chinese assets.

8. The international status of China's GDP has improved.

9. Increase state tax revenue.

10. The international purchasing power of the Chinese people has increased.

Disadvantages: 1. It is not conducive to China's exports.

2. It may exacerbate market speculation.

3. China's advantage in attracting overseas investment has weakened.

4. Reduced exports may lead to increased pressure on domestic employment.

5. It may lead to deflation.

6. Industries that rely solely on first-class advantages have been impacted.

7. There may be a "get-rich-quick effect".

8. It may exacerbate the expenditure burden of low-income groups.