RMB Exchange Rate Forecast Adjusted To 6.15

The trend of unilateral appreciation of RMB P has been reversed since February of this year.

< a href= "http://www.91se91.com/news/index_cj.asp" > RMB > /a > the trend change is mainly influenced by several factors: weakening the economic outlook, changing the policy stance of the people's Bank of China and the technical adjustment of market investors.

By reintroducing two-way volatility mechanism, PBC hopes to suppress speculative capital inflows, support exports and focus on domestic currency operations.

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From P, policy makers, including the people's Bank of China and the State Administration of foreign exchange, have highlighted the negative impact of excessive accumulation of foreign exchange reserves in recent years.

Premier Li Keqiang said at the beginning of this month that the high level of foreign exchange reserves has become a heavy burden on China. This is the first time that senior Chinese leaders have explicitly talked about the cost of foreign exchange reserves.

This means that policy attitudes towards capital inflows will change: asymmetric preferences exist in the past, but preferences have been balanced.

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< p > the dynamic change of RMB in the past 3 months seems to have had some effect on < a href= "http://www.91se91.com/news/index_cj.asp" > capital flow < /a >.

In fact, our estimates show that the "hot money" movement has shifted to outflow of $8 billion 200 million in April, while in February, the peak of recent inflows reached US $35 billion 400 million.

In recent years, the pformation of hot money into the outflow was partly due to the growth of foreign exchange deposits in Chinese companies, which increased by US $51 billion 500 million in the first 4 months of this year, much higher than the US $27 billion 200 million growth in 2013.

On the whole, because of the new trend of RMB since February, the market's expectation of unilateral appreciation of RMB seems to have subsided.

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< p > we believe that the recent RMB a href= "http://www.91se91.com/news/index_cj.asp" > depreciation "/a" does not mean that it has become a devaluation trend.

The renminbi still has room for moderate appreciation.

There are four reasons. First, the current account surplus accounts for 2% of GDP: China's current account surplus in 2013 is 2.1% of GDP, and we expect to maintain about 2% of GDP in the next 1-2 years.

This means that the yuan will be close to the equilibrium level, but there is still room for the renminbi to appreciate moderately.

The two is the difference between domestic and foreign interest rates: because the interest rate of major currencies is at a historically low level, the high interest rate in the domestic Renminbi means that the renminbi remains an attractive and holding currency.

Three, the policy priority is to promote the internationalization of RMB: from the perspective of a broader macroeconomic policy framework, promoting the internationalization of RMB has become one of the major policy priorities and a key element of the medium-term financial reform plan.

The four is the political pressure from the main trading partners.

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"P > but the possibility of continuing a moderate appreciation strategy in the future has also fallen."

Overall, due to the no longer significant unilateral appreciation trend and more two-way fluctuation trend, we have adjusted the US dollar / RMB exchange rate forecast to 6.15 at the end of 2014 and adjusted 2015 to 6.10.

Because the unilateral appreciation trend is no longer obvious and more two-way fluctuations, the reason for this potential RMB trend is to avoid the unilateral appreciation of the yuan and capital inflows, especially when the people's Bank of China seriously controls the accumulation rate of foreign exchange reserves.

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"P > is in line with our adjusted outlook for the renminbi. We have also adjusted the forecast of the deposit reserve ratio.

At present, we expect two rounds of deposit reserve rate reduction in 2014, each with 50 basis points, one in the third quarter and another in the fourth quarter.

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