What Is The Risk Of The RMB Against The US Dollar?

The yuan fell to its lowest level in the Hongkong market against the dollar in the past month, which is the latest sign that investors bet on further devaluation of the renminbi.

The offshore renminbi dropped to US $1 against the US dollar to 6.3907 yuan, the lowest level since September 25th.

The RMB on the Chinese coast is 1 yuan against the US dollar to 6.3530 yuan.

The difference between them was 0.0496 yuan earlier, the largest since September 23rd.

The decision of China's central bank to cut interest rates once again ignited capital will accelerate the escape from China at the time of slowing economic growth, increasing the pressure on the renminbi and ultimately forcing China to guide the renminbi to depreciate against the US dollar.

Koon Chow, senior strategist at Union Bancaire Privee, a Swiss private bank who manages $3 billion in emerging market assets, said the people expect the offshore RMB market to face lower risk of intervention.

J.P. Morgan Chase & Co, Morgan.

(JPM) in a research report on Friday, analysts estimated that China's capital outflow amounted to US $130 billion to $140 billion in September, close to the August level, although the decline in foreign exchange reserves in September was less than in August.

JP Morgan analysts said that the Central Bank of China could have intervened in large scale in September to beautify the official reserve figures.

Capital outflow is still the main reason for the depreciation of RMB in the medium term.

Eric Viloria, a senior foreign exchange analyst at Wells Fargo securities, said the PBOC's rate cut is in line with expectations and will play a positive role in supporting the economy, which will offset some of the negative effects of "double down" on the renminbi.

Viloria said that because China's economic growth is slow, it is not surprising that the rate cut will be reduced.

Viloria predicts that

There is a certain risk of a slight weakness, but in general it will remain stable.

The abolition of the deposit interest rate has further increased the flexibility of the entire financial system.

Sireen Harajli, a foreign exchange strategist at Mizuho bank in New York, said offshore renminbi is

It is expected to weaken immediately after announcing the "double drop" and is expected to fall on shore.

Harajli predicts that

It will fluctuate in a very narrow range, because the central bank intends to maintain exchange rate stability.

Harajli believes that such a radical relaxation of the PBOC may last until the end of this year, as the government's focus shifts to revitalize the economy and deviate from structural reforms.

The "double down" move is not a surprise to the market. It may be triggered by weak economic data in the third quarter, aiming to help China achieve 7% growth target.