RMB Devaluation Momentum Is Accumulating In January, Foreign Reserves Decline Or Larger.

Offshore and offshore renminbi Friday (January 8th)

At the end of the day, both sides stabilized and rebounded. As of press release, the offshore renminbi rose 25 basis points against the US dollar at 6.5887, while the offshore renminbi rose 31 basis points against the US dollar at 6.6814, and the difference between them remained at 1000 basis points.

But this does not mean that the RMB has gone through a dangerous period of decline. On the contrary, analysts believe that there will be a rapid or substantial adjustment in the short term.

The market momentum of further depreciation seems to be accumulating.

Since yesterday, foreign media reported that the Central Bank of China is strongly intervening in the RMB exchange rate to crack down on foreign currency forces.

Recently, the PBOC of the Central Bank of China has suspected that it will continue to intervene through the intervention of state-owned banks to support the RMB exchange rate. At the same time, the Central Bank of China will set the central parity of RMB against the US dollar at a higher level of 6.5636, the first to be seen in 9 trading days.

A European bank trader in Shanghai said, "state banks sell dollars at about 6.59 of the level, which is suspected to be a substitute for the central bank. This is what happened yesterday and yesterday."

Three other bank traders said in a telephone interview that at least 6.5890 Chinese banks are selling dollars on the offshore RMB against the US dollar under 6.5890.

Senior analyst of China Merchants Bank

It is indicated that the huge drop in foreign reserves may be related to the increase of capital outflow. There are two reasons: first, the weakness of the US dollar in December and the general rebound of non US currencies; therefore, there should be no significant loss in the valuation of foreign exchange reserves; two, in December, the central bank's efforts to intervene in the RMB exchange rate weakened, and the active consumption of foreign reserves should be lower than in the previous months.

Therefore, the expected decline may correspond to the larger scale of capital outflow, which can explain why the cross-border business of some foreign banks will be suspended.

Liu Dongliang pointed out that the unexpected decline of foreign reserves will make the market expect to derogate from the expected warming of the renminbi. It will also make the market speculate that the subsequent intervention rate of the central bank can hardly maintain enough strength and rhythm, so it may not be conducive to stabilizing the exchange rate, and the pressure of capital outflow will continue.

For the subsequent exchange rate trend, we should pay more attention to the CFETS RMB exchange rate index instead of the RMB to us dollar exchange rate.

Although the central bank has intervened heavily in the market to stabilize the RMB exchange rate temporarily, Liang Hong, an analyst with CICC, has published a research report, indicating that the renminbi will be subject to rapid and substantial adjustment in the short term.

The market momentum of further depreciation seems to be accumulating.

At the end of 2016, the exchange rate of RMB against the US dollar was forecast to be 6.87 (6.50 before forecast), which was 5.8% and 10.6% lower than that at the end of 2015 and in August 11th.

China Gold research reported that our assessment showed that the real effective exchange rate of RMB was overvalued by 3.1~8.6%1 at the end of 2014, and then increased by 4.5% in November 2015.

In view of the uncertainty of policy and market level in the pition to the floating mechanism, the risk premium may also increase significantly.

Continued foreign exchange outflow and market sentiment under the shock of capital markets are also not conducive to stabilizing the RMB exchange rate.

and

The latest figures also show the concern of CICC. The official reserve assets of the central bank in January 7th showed that the balance of China's foreign exchange reserves decreased by 107 billion 922 million US dollars to US $3 trillion and 330 billion 362 million at the end of 11 in the end of 2015, the largest decline in history and the lowest level in more than three years.

The data not only refreshed the record of the biggest drop in a single month.

This is also the lowest level of China's foreign exchange reserve since February 2013, which has continued the downward trend for several months.

Liang Hong expects to expand or expand further in January.

Under the influence of the devaluation of RMB, the scale of individual purchase of foreign exchange is expected to increase as the annual amount of foreign exchange purchased by US $50 thousand is renewed.

Liang Hong pointed out that the RMB exchange rate volatility or become a new "risk point" in the domestic and international markets.