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A correct view of the Renminbi exchange rate fluctuations

after following the previous day below 6.40, on December 9, down from 6.414 Yuan Yuan central parity against the dollar, creating the lowest since since August 2011. Meanwhile, the offshore renminbi-dollar exchange rate also fell below 6.50 and 6.51 points.

in fact, since December 3, Yuan against the dollar decline in a row, onshore RMB exchange rate continuously falling from 6.39 per cent to 6.45 Yuan on Friday about offshore renminbi exchange rate fall below the 6.52 6.42 per cent mark.   Onshore and offshore renminbi exchange rates are constantly refreshed 4 year low.

Yuan/dollar exchange rate continues to fall, causing some people in the market fears of a Yuan devaluation. In fact, such concerns don't have to.   Rational perspective of short-term trend of RMB exchange rate and fully aware, devaluation of the Yuan does not exist long lasting foundation.

trend of RMB exchange rate in perspective, we must first see, recent currency lower, is the fluctuation of the dollar under the background of interest. This week, the market will usher in the anticipated US Federal Reserve monetary policy meeting, the Fed's last rate meeting of the year. Markets widely expected the US $ session will start raising interest rates for the first time in nearly 10 years. Due to the changes in spreads, industry analysis, dollar rate hike may lead to appreciation of the dollar and lead to downward pressure on the dollar against other currencies.   Of course, regardless of whether the dollar rate increase in December, US dollar interest rates are a gradual process, and its impact on cross-border capital flows, but not very significant.

Secondly, we want to see recently against the dollar, mainly due to the stronger dollar overall, a depreciation of RMB exchange rate and currency volatility is lower than other countries. From short term, under the influence of a stronger US dollar, in November of major international currencies depreciated against the dollar appears to be relatively large. To the end of November, Euro 4% end of October against the dollar, pound sterling against the dollar to 2.4%, the yen against the dollar to 2%. The medium and long term, in recent years, significant appreciation of RMB real effective exchange rate, since the July 2005 revaluation revaluation 55%, nominal effective exchange rate of the Renminbi exchange rate appreciation package 46%.   Especially at the end of 2014, from August 10, 2015, when the vast majority of emerging market currency devaluation, the real effective exchange rate of RMB real effective exchange rate appreciated by 2.8%.   

based on this, the trend of RMB exchange rate in perspective, should not only look at the bilateral exchange rates of the Yuan against the dollar, but should the Yuan to a basket of currencies of the multilateral exchange rates and longer-term trends.

in fact, in order to more fully reflect the value of a country's currency change, published December 11 for the first time the China foreign exchange trading center CFETS RMB exchange rate index. The index is a weighted average rates, mainly used for computing a weighted average of the country's currency against a basket of foreign currencies exchange rate movements. Experts said the announcement on the currency index on a regular basis will help guide market exchange rate calculated with reference to a basket of currencies as the main frame of the RMB exchange rate level.

China Merchants securities chief macro analyst Xie Yaxuan said, compared with the reference of the single currency with reference to a basket of currencies to better reflect a country's goods and services comprehensive competitiveness, can also play the role of exchange rate regulation of imports and exports, investment and the balance of payments. Such as the recent currency has devaluated against the dollar, but with reference to a basket of currencies, conclusions obtained in the appreciation of the Renminbi.



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