RMB Soars 1600 Pts, Forex Reserves Up $100B, Dollar Suppression Fails
China's latest foreign exchange reserves data have been announced.
After being continuously suppressed by the US dollar and falling for nearly a year, the foreign exchange reserves have shown a significant upward trend against the market.
At the same time, the renminbi has also launched a significant increase, rising by more than 1,600 points after the New Year's Day holiday.
Chinese assets have launched a major counter-offensive, and surprisingly, Wall Street and many other institutions have also provided support.
01, Renminbi surges by 1,600 points
By the afternoon closing, the onshore exchange rate of the renminbi against the US dollar continued the consecutive rise from last week, closing today at 6.7712, rising by 876 points again.
The offshore exchange rate also saw a significant increase.
At the opening, the offshore exchange rate of the renminbi against the US dollar was 6.8309, and then it kept rising until 3:30 PM, reaching a peak of 6.7669, with the highest increase exceeding 600 points. The main counter-offensive unfolded in the afternoon.
Advertisement
So far this year, the lowest point of the offshore exchange rate fell to 6.9393, which means that the maximum increase within the year has reached 1,600 points.
For most of last year, due to the continuous interest rate hikes by the US dollar, the renminbi experienced two significant declines. However, in the recent period, the exchange rate of the renminbi has easily broken through multiple thresholds.The magnitude of U.S. interest rate hikes is continuously diminishing, indicating that the dollar has reached its peak strength.
02, Foreign Capital Keeps Buying In
In recent days, what is more encouraging than the steady recovery of A-shares is the continuous net buying by Northbound capital.
Today, Northbound capital once again achieved a net purchase of 7.7 billion yuan, and in just the last four trading days, the net purchase amount has exceeded 28 billion yuan.
Looking back at last year, although the Chinese yuan was in a downtrend for most of the time, Northbound capital still accumulated a net purchase of 90 billion yuan.
The continuous influx of foreign capital is greatly related to foreign investment banks' optimism about the Chinese market.
A report published by the international investment bank Goldman Sachs shows that they are very optimistic about China's currency and stock market.
The Goldman Sachs team believes that by the end of this year, the Chinese yuan will rise to 6.5 against the U.S. dollar, but this is obviously too conservative.
Previously, the Goldman Sachs team predicted that by the end of this year, the Chinese yuan would be 6.9 against the U.S. dollar, but this was already broken through last week, and on the first day of this week, it broke through 6.8 again.
It is estimated that after the Federal Reserve stops raising interest rates, the Chinese yuan will return to the level of 6.5.If the Federal Reserve initiates interest rate cuts, the Chinese yuan is likely to quickly surpass last year's peak, potentially breaking through the 6.3 level.
03, Leading Asia's Flight
At the same time, the Goldman Sachs team believes that the MSCI China Index will rise by 15% this year. The index has rebounded nearly 50% from the end of last October to the current level.
In the meantime, many Wall Street institutions are optimistic about Chinese assets and are actively investing substantial capital.
Additionally, numerous investment banks have high expectations for the stock markets across the entire Asian region, with the belief that a weakening dollar and China's economic recovery will help propel Asian stock markets into a technical bull market.
Especially with the optimization of China's epidemic prevention policies, this will drive a strong recovery of the Chinese economy. In the current trade landscape of China, ASEAN is the largest trading partner, so the recovery of China's economy will bring significant impetus to both the Greater China region and Southeast Asia.
Last week alone, the MSCI Asia Pacific Index rose by 3.6%, nearly double the gain of the S&P 500 Index, and the Hang Seng Index in Hong Kong has already increased by 7.8% in the first week of this year.
04, Foreign Exchange Reserves Also Counterattack
At the same time, China's foreign exchange reserves have joined the counterattack.
At the end of September last year, our country's foreign exchange reserves were $3.0289 trillion, and they have seen a sequential increase for three consecutive months, reaching $3.1276 trillion currently, with a cumulative increase of nearly $100 billion.The growth of foreign exchange reserves is related to the continuous expansion of China's trade surplus and is also closely associated with the persistent inflow of foreign capital into China's capital markets.
Although the US dollar intended to suppress yuan-denominated assets through continuous appreciation, it now appears to have failed across the board.
Leave a Comment