It Is Difficult For The US Index To Show A Strong Trend?

Since last week, the CFETS index of the RMB exchange rate has entered a new round of decline. By Tuesday, it had broken through the 93 level for the first time, a new low since the index was announced. During this period, the bilateral exchange rate of the RMB against the US dollar has fluctuated steadily in a narrow area. The relationship between the two shows a seesaw relationship, that is, when the US dollar index has a certain unilateral trend, The exchange rate index will bear the impact of fluctuations in other currencies.

From a year-round perspective, after all, the Federal Reserve has raised interest rates twice or so, and the current trend of the US Index is more seen as an adjustment than a turn, although different parties have different views on the extent of the adjustment of the US Index; For the bilateral exchange rate of RMB against the US dollar, there is still room for depreciation in the whole year, but this part of adjustment is likely to be realized in the second half of the year.

In addition, the demand for the international allocation of RMB assets is still there, and there is always some pressure on capital outflows, which is also an important factor that the expected depreciation of RMB cannot fade away in a certain period of time. Although the data on foreign exchange reserves in February released by the People's Bank of China and the data on foreign exchange settlement and sales released by SAFE have improved significantly, it still shows that capital There is outflow pressure.

From a relatively short period of time, both internal and external environments require the bilateral exchange rate of RMB against the US dollar to remain generally stable. In addition, on the practical level, since the exchange reform on August 11, the regulators strengthened the authenticity review of the foreign exchange purchasing end, which was caused by the slow clearing of foreign exchange purchasing demand. From the feedback to traders, many customers still chose to buy foreign exchange on bargain hunting, and customers were not sensitive to the adjustment of the US Index.

Of course, the People's Bank of China is still actively guiding market expectations and adopting a prudent and neutral policy in open market operations. In addition, the offshore CNH exchange rate continues to be stronger than the onshore CNH exchange rate. Domestic purchase and external settlement speculation cannot be carried out. Without speculation, the actual pressure is not great.

Externally, in June Federal Reserve Before the interest rate increase, the market is expected to focus on the details of the implementation of the new policy of President Trump of the United States, and the factors of interest rate increase will take a back seat; Also, the French election and whether the European Central Bank has entered a tightening cycle will affect the performance of the US dollar, but more of them are relatively negative. It is expected that the US index will not show a strong trend.

The probability that the Federal Reserve will continue to raise interest rates in May is only 6.4%, while the probability of raising interest rates in June is less than 50%. Therefore, before June, the market will pay more attention to whether Trump's policies will be recognized by the market. At least from the current perspective, the voice of doubt is rising.

As for this round of adjustment of the US Index, on the one hand, the market began to question whether the US President Trump's policies would boost growth and inflation, and the "Trump Quote" gradually returned to rationality; In addition, after the Federal Reserve raised interest rates this month, the market was disappointed with the follow-up pace of the Federal Reserve's interest rate increase, which also contributed to the settlement of long positions in the US dollar. The US Index quickly fell back from the 102.20 high at the beginning of the month and fell below the 100 threshold.

The bilateral exchange rate of RMB against the US dollar has a stable "requirement", while the US Index is relatively weak, and the two cannot be synchronized. In addition, the overall volatility of the bilateral exchange rate of RMB against the US dollar is obviously lower than the mainstream currency In the end, the adjustment of major currencies is mostly undertaken by the CFETS exchange rate index, which is basically consistent with the performance of the index for more than a year.

Since this year, the volatility of offshore dollar/yuan options has also been declining. On Tuesday, the implied volatility of one-year onshore dollar/yuan options hit a nearly one-year and a half low of 3.55%, and the volatility of offshore dollar/yuan options also hit a one-year and a half low of 5.4%. Of course, the implied volatility of one-year options in the mainstream currencies of the yen, the Australian dollar, the British pound and the euro is no exception, falling from around 10% - 12% at the beginning of the year to around 8.5% - 9.6% at present.

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