The strength of the US dollar reappeared. Yesterday, the US dollar index broke through the 109 mark in intraday trading, hitting a new high in 20 years. The exchange rate of non-US currencies fell across the board. The exchange rate of the euro against the US dollar fell below 1:1 again, and the Korean won fell to a 13-year low. The exchange rate of the RMB against the US dollar depreciated in both the onshore and offshore markets, approaching the 6.9 mark.
The international foreign exchange market has shown a “one-sided” trend, and the European energy supply crisis is the “fuse. On the 22nd, the price of natural gas futures in Europe once again exceeded US$3,000 per 1,000 cubic meters, approaching the historical record of US$3,892 per 1,000 cubic meters set on March 7. On the 23rd, U.S. natural gas futures prices hit a new high since 2008.
The comprehensive PMI data for the euro area in July released on the 23rd was 49.2, a new 18-month low, indicating that the risk of recession in the euro area has increased, especially the three major economies in the euro area, Germany, France and Italy. The manufacturing industry has declined significantly, and the market is bearish. The atmosphere of the euro is strong, and the funds shorting the euro last week have hit a new high for the year.
Not only the euro area, but other regions are also facing the risk of continued decline in economic sentiment. The Bank of England has warned that the UK economy could slip into a recession in the fourth quarter that could last for more than a year. The export data of South Korea, known as the “canary” of the world economy, also performed poorly, with total exports increasing only 3.9% year-on-year in the first 20 days of August. Clearly, the global economy faces a heightened risk of recession. However, under the unexpected tightening of the Federal Reserve, the interest rate spread further widened, pushing up the US dollar index “outstanding.
The US dollar index continued to rise, coupled with domestic interest rate cuts, the exchange rate of the RMB against the US dollar was naturally under pressure. Since the interest rate cut on the medium-term lending facility on August 15, the spot exchange rate of the RMB against the US dollar has begun to depreciate. Based on the closing price of 6.8510 yesterday, it has fallen by more than 1.7%.
Nevertheless, compared with the recent sharp drop in the exchange rate of the euro and the Korean won, the performance of the renminbi is still strong on the whole. Most researchers reminded that the widening of interest rate spreads at home and abroad has limited impact on the RMB, and it is not appropriate to pay too much attention to the depreciation pressure of the inversion of Sino-US interest rate differentials on the RMB. In fact, after the release of China’s foreign trade surplus data in July, transaction-oriented funds appeared to make up significantly. After the “interest rate cut” in August, the inversion of the Sino-US interest rate gap intensified, and it did not trigger obvious foreign capital outflows.
For a long time, the strong basic account surplus has been providing solid support for the RMB. Exports in July increased by 23.9% year-on-year, and the trade surplus reached 682.69 billion yuan. The monthly export growth rate and trade balance exceeded market expectations again. We must see that the supply capacity of Europe and other regions has been significantly weakened, and the impact of the energy crisis and the transformation of the energy structure has been superimposed, and China’s foreign trade exports have presented new characteristics. From this point of view, a moderate depreciation of the renminbi is conducive to maintaining export competitiveness against the backdrop of declining global economic prosperity, and has positive significance for keeping the economy operating within a reasonable range.