RMB burst 600 points! Just now the central bank and the foreign exchange bureau made a move, and the exchange rate rose sharply!

On the morning of July 20, the People's Bank of China and the State Administration of Foreign Exchange announced that the macro-prudential adjustment parameters for cross-border financing of enterprises and financial institutions will be raised from 1.25 to 1.5, which will be implemented on July 20, 2023.

Affected by this news, the exchange rate of RMB against the US dollar in the foreign exchange market rose sharply on the same day, and the offshore RMB rose more than 600 points against the US dollar during the day, as of 9 pm, to 7.1692; the onshore RMB rose nearly 600 points against the US dollar to 7.1655. Throughout July, the spot exchange rate of onshore and offshore RMB against the US dollar has risen by more than 1,000 basis points.

The macroprudential adjustment parameters of cross-border financing are important tools for regulating cross-border capital flows and exchange rates. This adjustment is the second adjustment in nearly 9 months since the central bank and the foreign exchange bureau raised the macro-prudential adjustment parameters for cross-border financing on October 25, 2022.

Wen Bin, chief economist of China Minsheng Bank, said that the current exchange rate of RMB against the US dollar is about 7.2, and this adjustment reflects the intention of regulators to reasonably guide market exchange rate expectations.

Since the beginning of this year, the RMB has experienced two waves of significant depreciation against the US dollar, falling below the integer mark 7 in May, and then continuing to fall, reaching a stage low at the end of June, and the spot exchange rate of offshore RMB against the US dollar once fell below 7.28.

Recently, the renminbi has seen a correction against the dollar, with both onshore and offshore renminbi spot rates rising more than 1,000 basis points against the dollar at their highest point at the end of June as of 12 o'clock on July 20.

Raisi

ng the macro-prudential adjustment parameters of cross-border financing of enterprises and financial institutions is conducive to further expanding the use of foreign capital and broadening financing channels, facilitating cross-border financing for domestic enterprises and institutions, reducing the difficulty and cost of financing for the real economy, and providing services for the development of the real economy. This will help to better coordinate the overall situation at home and abroad, effectively use the domestic and international markets and resources, and coordinate the domestic and international dual circulation.