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The RMB Against A Basket Of Currencies Rose To A Six-year High

The RMB Against A Basket Of Currencies Rose To A Six-year High

According to a press release issued on the website of the People’s Bank of China last night (November 18), China’s foreign exchange self-discipline mechanism has held its 8th meeting this week and passed the “China Foreign Exchange Market Standards” and a proposal for a neutral exchange rate risk concept. It pointed out that in the future, the RMB exchange rate will fluctuate normally in both directions, and the goal is to balance the degree of deviation and the intensity of correction. The statement pointed out that there is room for appreciation or devaluation of the renminbi in the future, because when the central banks of major economies in the world begin to adjust their monetary policies, there will be more factors affecting the exchange rate. And it is recommended that enterprises and financial institutions stick to risk neutrality to better respond to external shocks.

The warning of the foreign exchange self-discipline mechanism is worthy of attention. As early as May this year, the RMB rose to 6.4 against the US dollar. In order to force the RMB exchange rate to fall, China's foreign exchange self-discipline mechanism held its 7th meeting on May 27. Subsequently, the central bank raised the foreign exchange deposit reserve of financial institutions by 2 percentage points on the afternoon of the 31st. This was the first increase in foreign exchange reserves in 14 years, and the renminbi immediately began to weaken against the U.S. dollar for two months.
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