Guest Commentator of CFETS
On February 28, 2017, the CFETS RMB exchange rate index closed at 93.84, losing 0.40 percent from the end of January; the RMB exchange rate index based on the BIS basket and RMB exchange rate index based on the SDR basket closed at 95.10 and 95.79 respectively, losing 0.48% and gaining 0.46% from the end of January. Two of the three RMB exchange rate indices are depreciated slightly and the rest is appreciated slightly from the end of January, all of the three indices moved smoothly last month. In February, the annualized volatility of the CFETS RMB exchange rate index turned out to be 2.31%, lower than that of the USD/CNY central parity, which was 2.95%, indicating that the RMB exchange rate continued to remain generally stable against a basket of currencies.
Since February, as the domestic economic data showed continuous improvement, elasticity of the two-directional fluctuation of the USD/CNY exchange rate increased, and the expectation of a weaker RMB further relieved to some extent, the market holds different views to the trends of the RMB exchange rate. In this context, although influenced by Trump’s opinions on tax policy, the high expectation of Fed Rate-Hiking on March, changes in European elections, and the volatile rise of the US Dollar Index, USD/CNY exchange rate still remained stable presenting a two-directional fluctuation. The USD/CNY Central Parity Rate on Feb 28th is 6.8750, losing 0.24% from the end of January; the USD/CNY Closing Rate is 6.8689, adding 0.13% from the end from January.
Even though the uncertainties still exist, as Trump’s policies, the Fed’s rate-hike and possible Black Swan incidents will continue to pose risks to global market in the future, RMB will keep acting as a stable strong currency based on fundamental factors, as increasing highlights and positive changes are seen in the economy, thus RMB exchange rate will remain generally stable at a reasonable level, and strengthen its flexibility with a two-way fluctuation tendency according to the changing supply and demand in global market.(Come from:The people's bank of china)
