Renminbi Takes out Psychological Targets, Depreciation Expectations Harden

iFeng: 三个月连失四关 人民币心理防线失守?
Commerzbank in Singapore, senior economist Zhou Hao said that at this time, if the yuan continued to depreciate, the market will think that the RMB will appear the pattern of 2005--2015 of unilateral movement,
only this time unilateral devaluation. According to a Bloomberg survey of foreign exchange market in late April, more than eighty percent of respondents did not think that the CFETS Index would fall to 95 or below in the short-term, and thus can be said that the level of psychological defense market, but the index has been since April RMB Crack 98,97,96,95 and now 94.

But economists believe that China's central bank has no psychological barrier. OCBC Bank in Singapore economist Xie Dongming said that the RMB exchange rate index continued to break new low, with the market's central parity mechanism.
Instead of having any targets in mind, the PBoC is seen as tamping down volatility.
He explained that this year most of the time with a weaker dollar, the RMB against the US dollar firmed against the currency basket Zoubian different trend: the British retreat Europe since after the first strong dollar is weak, the yuan against the dollar and a basket of index "double derogatory ", which may reflect the shortcomings of the central parity mechanism. The reason is that the central parity mechanism more transparent the market can more accurately predict the central parity, resulting in higher spreads abroad, to further enhance the expected depreciation and thus the yuan under pressure.

For this, China's central bank might intervene. CITIC Bank International China chief economist Liao Qun, chief strategist believes that if the RMB spot exchange rate fluctuate too much in one day, then the central bank will sell US dollars on the market; if the RMB exchange rate to a basket of indices fell too fast, the central bank's intervention is through intervention on the spot closing price.

Outflows are hard to stop:
On Tuesday, the State Administration of Foreign Exchange Shanghai Branch of window guidance to banks within its jurisdiction, jurisdiction requires banking institutions to strengthen capital outflows under review. Wherein for partnership enterprises for ODI (foreign direct investment) business registration, if trace its source funds for individual investors, the need to suspend the processing of these operations.

According to informed sources, some underground banks in Shenzhen, one can deposit into RMB, then to the Hong Kong branch of the HKD taken out, thereby escape regulatory control.

The source also added that although the authorities have called for measures to curb illegal capital outflow, but this phenomenon can not be eliminated.
Brexit is a new excuse for currency trends in place for years.
Zhang Ning, an economist at UBS in Hong Kong says renminbi against the US dollar by the end of 2017 is expected to adjust from seven to 7-7.2 said the renminbi faces new depreciation pressure after the UK voted to leave Europe. In addition, UBS forecast to the end of the year yuan against the US dollar fell to a maximum of 6.8.

OCBC Bank in Singapore economist Xie Dongming said that the current central parity mechanism has a smoothing effect, but can not seem to change the downward trend in the yuan, and this will lead to unilateral fell devaluation pressure can not be completely digested . He believes that the government's administrative control, although hopes to postpone purchase of foreign demand, is expected to wait for two-way volatility is formed to ease the purchase of foreign pressure, but if the actual market situation is not expected direction, will become "slowly boiling frog" situation .


  1. China should just allow rmb to float, then even if it massively depreciates no one can accuse China of currency manipulation

    1. China couldn't be accused of manipulation, but it would be blamed for wrecking the party.