Exchange Rate Depreciation Helps To Help The Economy Grow.

Now the RMB exchange rate has a basket and no interval, of course, it can not be said to crawl.

So the market will ask a question, will there be an interval in the RMB index instead of always downward? Frankly, no one can answer this question so far.

But if there is an interval, the current RMB index may be in the bottom area.

We can understand this way.

In the past many years, the fluctuation range of Singapore dollar is +/-2%. There are many explanations for this, but a widely accepted explanation is the interval.

Adapt.

According to this logic, the fluctuation range of the RMB basket should be set at around +/-3%, consistent with the inflation control targets set by China.

Another decision factor beyond the interval is the slope. The slope seems to be a very abstract concept, but it is not difficult to understand. If the policy goal is to make the currency appreciate by 2% every year, then divide it by 2% by 365. Then we can get a rough path. Every point on this path can be considered as the "Midpoint". With the "Midpoint" as the benchmark, setting up the trading fluctuation range, we can get a rough trading space.

The middle of the year is a good time to see.

In the past six months.

Without looking at it, I was really shocked. The depreciation rate of RMB against a basket of currencies in the past six months has reached 5.8%.

This may be the most proud thing about the Central Bank of China in the past six months: capital outflow has not increased, but the exchange rate has not changed.

But it helps to help the economy grow.

At any moment, however, we must know that too much is too bad.

A half year depreciation of 5.8%, a simple mathematical calculation will tell the market that the yuan will depreciate more than 10% against a basket of currencies throughout the year.

The question at this time is very simple and direct. Is the RMB depreciated in order to depreciate or is it depreciating in order to create volatility?

In other words, if the renminbi can remain strong at such a time, the market will form a two-way fluctuation of the RMB. If the RMB continues to depreciate, the market will think that the RMB will have a unilateral trend of 2005-2015 years. Of course, the unilateral trend is unilateral depreciation now.

It is time to review the Singapore model. Under the BBC mode, the exchange rate of Singapore dollar is basically stable, but it follows three basic principles: basket (basket), band (interval) and crawling (crawling).

The currency basket is relatively easy to understand. In fact, it is a nominal effective exchange rate with a good weight. The interval represents the volatility - no volatility is easy to be speculated by the market, and crawling represents the stability of the "stable" - avoid jumping and crawling slowly, and do not give the market too much surprise.

If we introduce these concepts, we can find that assuming that the fluctuation range of RMB pactions is +/-3%, the current slope points to at least a depreciation of more than 5%.

Simple mathematical calculations show that depreciation of 5% per year is 2.5% in half a year, plus 3% below. In the first half of the year, it can depreciate at most 5.5% - and now the renminbi has depreciated 5.8% against a basket of currencies.

So, all the problems are back to the origin: if the fluctuation of the RMB index has no interval, all the above discussions are meaningless, and the market will also form the expectation that the RMB will depreciate for a long time.

If the fluctuation of the RMB index has an interval, the current fluctuation should be close to the bottom area - a currency that exceeds a certain depreciation rate (for example, a depreciation of 10% every year), and the market will classify its depreciation as "structural depreciation".