The Recent Fluctuation Of the RMB Exchange Rate Is A Normal Healthy Adjustment

Since the beginning of June last year, the domestic RMB exchange rate against the US dollar has fluctuated higher. By the end of February this year, the RMB exchange rate had appreciated by 10% from the end of May last year. Entering March, the RMB exchange rate fell back to the 6.50 era, erasing the gains during the year.

Since entering the 6.40 era at the beginning of the year, the RMB exchange rate fluctuated within a narrow range from 6.43 to 6.50 from January 6th to the end of February, 2021. After entering March, it fluctuates around 6.50.

The recent decline in the RMB exchange rate is due to several reasons. One is the third wave of contagion in Europe, and the market’s risk aversion has regained; second, rising inflation expectations in the United States, rising U.S. bond yields, and the convergence of China-U.S. bond yield gaps; third, new stimulus plans for vaccination have boosted the U.S. Economic recovery is expected, and the US dollar index has risen instead of falling; fourth, expectations of currency tightening in advance have risen, and the prices of risky assets represented by US stocks have fluctuated sharply, and capital outflows are recurring in emerging markets; fifth, the game between major powers is still fierce, highlighting the increasingly complex and severe international environment .