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Chinese buying "room" the road "robber"

Chinese buying

continuous RMB devaluation in the near future, the Central Bank announced on 15th Yuan central parity against the dollar 6.4559, by 64 points compared with the previous trading day, devaluation of the Yuan mid-point was the 7th consecutive. During this round of devaluation, foreign exchange Bureau said, saying the Yuan depreciated basis does not exist.

such comments, however, did not eliminate market devaluation expectations. Recently, the China foreign exchange trading center announced three sets of Renminbi exchange rate index: CFETS RMB exchange rate indices, BIS reference currency basket of the Renminbi exchange rate index, refer to the SDR currency basket of the Renminbi exchange rate index. Market view, which means that the Yuan will be de-pegged and paving the way for the devaluation of the Renminbi.

in fact, as early as July 2005 exchange rate reform, China will introduce to the market when supply and demand based on adjusted with reference to a basket of currencies, managed floating exchange rate system. Just the composition of the basket was not announced. Exchange rate fluctuations, is the result of exchange rate formation mechanism reform, which not only reflected the domestic supply and demand, also reflect changes in international financial markets. International concerns for the future of China's economic slowdown, leading to continuous capital outflow from China.

while the main concern of the present international financial, is the US dollar interest rates. Fed rate meeting this week, the market for dollars expected rising interest rates, and continued loose monetary policy in China stack, causing the devaluation pressure on the currency to rise, increasing the strength of investors selling on the Yuan, RMB exchange rate parity with the US dollar falling.

the flexibility of the RMB exchange rate to improve even more important, in RMB after joining the SDR, banks tolerance for currency devaluation on the rise. In August 2015, experience in capital market under the impact of exchange rates, the risk of capital flight caused by financial market volatility, the root cause is the lack of flexibility of RMB exchange rate formation mechanism.

with the change of economic fundamentals, accumulated pressure of RMB exchange rate and need to be eliminated by elastic wave. If not, once the catalyst for some events, it is easy to form a sharp adjustment shock, spread to China as well as global financial markets. Capital flows and fluctuations in exchange rates can ease market fundamentals change, improvement of elastic to avoid the centralised adjustment pressures.

 

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