The Momentum Of Cross-Border Capital Flows Continues To Stabilize.

After a fall from the peak of US $4 trillion, China's foreign exchange reserves finally stabilized at the $3 trillion level.

The official foreign exchange reserve data released by the central bank showed that the balance of reserves at the end of 5 was $3 trillion and 50 billion, a net increase of $24 billion in that month, and the scale of external reserves has been rising for fourth consecutive months, the longest uplink cycle since June 2014.

The increase in external reserves in May was mainly attributable to the increase in valuation of non US assets.

The rise.

First, in May, the US dollar index fell by nearly 2.2%, and the non US currencies such as the euro and yen appreciated relative to the US dollar, leading to an increase in the number of non US currencies plated into dollars.

According to the agency's estimates, this part of the valuation factor contributed nearly $18 billion to the recovery of the month.

Secondly, in May, asset prices of many countries, especially the rise in bond prices, contributed to the recovery of foreign reserves.

During the month, yields on global bond markets generally declined, and bond asset prices rose sharply, boosting the scale of foreign reserves.

The above two reasons are the positive pull effect of the external reserve recovery. In addition, cross-border capital flows continue to turn to a good momentum and weaken the scale of foreign reserves.

The continuous recovery of foreign reserves has also made this year a year.

The exchange rate stabilized against the US dollar.

It is worth noting that not only the renminbi's nominal exchange rate against the US dollar has been declining, but the market's expectations of the RMB exchange rate have also been adjusted.

Many Chinese and foreign institutions have raised the forecast level of RMB against the US dollar at the end of the year.

In addition, the central bank recently introduced the pricing mechanism of the central parity of RMB into the counter cyclical adjustment factor, while weakening the influence of the closing price of the previous day on the middle price, and strengthening the monetary authority's ability to control the exchange rate. It helps to prevent the subsequent increase in the US dollar due to the Fed's interest rate increase, resulting in the irrational fluctuation of the RMB exchange rate.

The addition of the counter cyclical adjustment factor and the superposition of external reserves and stability are favorable for the RMB exchange rate to remain relatively stable during the year.

Conversely, the stabilization of the RMB exchange rate also helps to stabilize the scale of foreign reserves.

Considering the Fed's increase in interest rates and the reduction of its form, it has led to the global

As for factors such as reflux, the scale of our foreign reserves will continue to slow down. This is not just the situation that will happen in China, but also in other non US currency countries.

However, many people in the industry have analyzed that China's foreign exchange situation has stabilized, and it is difficult to reproduce big fluctuations in the next two or three years.

The model parameters of the countercyclical factors are set by each quotation bank according to the judgement of macroeconomic and foreign exchange market situation. We can see that the premise of the countercyclical factor's influence is the correct model parameters.

Since parameter selection and model setting have great uncertainty, the practice of how to counter cyclical factors remains to be seen.

In addition, the addition of counter cyclical factors is an external force intervention. Such a non market force will also disturb the market's expectation of RMB to a certain extent, and whether the countercyclical factor can be accepted by the market and whether it can achieve the desired effect continuously is also uncertain.

In the long run, the basic factors such as the interest rate level, inflation level, fiscal policy, monetary policy and other basic factors are the fundamental reasons for the leading exchange rate changes.

Considering the continued weakness of the US dollar index, the US non farm employment report in May was not satisfactory. The economic fundamentals data restricted the recovery of the US dollar index and supported the appreciation of the RMB exchange rate.

But at the same time, in the middle of June, the Fed's high probability of raising interest rates will also restrict the decline of the US dollar index, thereby inhibiting the appreciation of the RMB against the US dollar.

On the whole, the central parity of RMB against the US dollar in the 6.7 era can be maintained for a long time, and whether there is still room for further growth of the renminbi remains to be seen.

But even if the US Federal Reserve chose to raise interest rates in June, the US dollar index continued to rise steadily. The appreciation of the current exchange rate has greatly weakened the overall depreciation pressure of the RMB.

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