Devaluation Is The Trend Or Will Return To The Era Of 7

Devaluation is the trend or will return to the era of 7

Since May this year, the yuan continues to depreciate, record lows. The market seems to China's official rhetoric and lack of a strong faith, in spite of the British referendum on Europe off the black swan event remarkable performance in renminbi and foreign exchange reserves increased unexpectedly in June, but this does not prevent economists Bearish attitude yuan.

Some economists say the organic phase, the renminbi may have to continue to depreciate during the year is expected to fall below 7, the minimum dropped to 7.2 or depreciation by more than 10%, which some economists and expected early matches. So what to make of these signs of economists believe that the RMB exchange rate will return to 7 era it?

Devaluation is the trend

RMB in the past six months have always played in the gun lying story. British battle off Europe, the renminbi did not have much exposure to de-risk positions in Europe and investors sought a safe haven, the yuan was "victimizes" onshore renminbi against the US dollar fell to five-year low. Also in this year, the Fed rate hike is expected to let the yuan losing streak on the 4th, the central mother eventually sell only push back short.

Wednesday's opening price against the dollar depreciate to 6.6857, a record low of November 2010, the yuan against a basket of currencies also reached the lowest since October 2014. Offshore renminbi exchange rate fell below 6.7, the onshore renminbi exchange rate is extremely close to 6.7.


The first three days of last week, the central parity of RMB against the US dollar depreciated 545 points, compared with the British retreat Europe fell by a record low of 329 points. The last three months, the onshore renminbi exchange rate against the US dollar, as well as offshore renminbi against the US dollar has depreciated by 3.25%. So far this year, the RMB against a basket of currencies has depreciated by 5.9%.

Why the RMB will continue to fall? The following four reasons may be able to get to know this:

(1) Chinese corporate debt deleveraging continued, "going out" willingness to further warming; plus a number of foreign speculative forces short lever Asian currencies including renminbi, but also to bring a certain devaluation of the RMB exchange rate pressure.

(2) the devaluation of the RMB exchange rate index is also the base of factors.

(3) the devaluation of the RMB exchange rate index is also affected by a slightly higher price level in China's influence, China's overall current level of inflation is higher than the United States, the RMB real effective exchange rate appreciation pressures faced. In order to maintain a relatively stable real effective exchange rate, the nominal effective exchange rate depreciation of certain requirements.

(4) China's economic recovery is still weak, despite the remarkable level of domestic inflation, devaluation will help stimulate domestic consumption, China may cut interest rates further RRR, which will suppress the yuan.