Emerging market currencies in a bear market
Basic in a bear market emerging market currencies fed open raise interest rates before and after the course, as the dollar index rose, the yuan has experienced continuous decline in ten days later, stabilizing this week.On December 22, middle price 6.4746 yuan against the dollar, a rise of 7 basis points in the last trading day.Among 21, the yuan against the dollar at 6.4753 yuan, raised 61 basis points on the previous trading day, the median price since December 7th consecutive Yin fell momentum finally stop here.
The fed open raise interest rates before and after the course, as the dollar index rose, RMB has experienced continuous decline in ten days later, stabilizing this week.On December 22, middle price 6.4746 yuan against the dollar, a rise of 7 basis points in the last trading day.Among 21, the yuan against the dollar at 6.4753 yuan, raised 61 basis points on the previous trading day, the median price since December 7th consecutive Yin fell momentum finally stop here.
"Renminbi has with the us dollar to take off the hook, under the role of the federal reserve to raise interest rates of a strong dollar cycle, the renminbi in the next year will continue to depreciate," bank of America
merrill lynch, chief currency analyst David Woo to 21st century business herald reporters in an interview.He said that the recent trend has obviously, after falling to a certain degree, the central bank will intervene, to avoid falling too fast."Exchange rate three times after falling on a raised may become a new paradigm in the future."
He expected the dollar against the yuan will rise to 6.9 in 2016. As a global leader in macro policy and exchange rate market extremely influential analyst, David Woo expect the fed to raise interest rates as early as in the first half of this year, before and after the yuan is going to change the main track the status of the dollar.
"After the renminbi remained with the dollar is the low interest rates and exchange rate as the dollar, but now that the dollar will be further strengthened, the lost following the reason for the dollar."David Woo to 21st century business herald reporters.
But he stressed that allowed the yuan to depreciate is good for China's economy, its aim is to increase its space for domestic monetary policy.
The 21st century: can be seen from the recent ten even fell significantly, the people's bank of China and no admission to
intervene.To allow the yuan to depreciate logic in where?Is expected to fall in?
Woo: I think the motivation of depreciation is driven by demand for monetary policy space, rather than export competitiveness.Analysis of the current environment of China, we think, at the same time of economic slowdown, China in fact is also tightening monetary policy.This is the RMB real effective exchange rate levels as well as practicalThe interest rateStill too high.We think that China should implement looser monetary policy, allowing the yuan to weaken.
At the beginning of 2015, there has been concern in the decline of the yuan may cause too much pain to enterprise, because they have a large number of unhedged foreign currency denominated debt.There are, however, anecdotal evidence suggests that since August 11, Chinese companies have been busy to reduce their foreign currency risk, and the people's bank of ChinaForeign exchange reserves,Has been a lot of share financing for these hedging activities.
However, there is no doubt that the Chinese peoplebankThe pace of foreign exchange reserves outflow is unsustainable.We believe that the central bank's foreign exchange reserves of loss reserve released is not reflected in the actual quantity.
As the fed to raise interest rates and the bank of ChinaThe interest ratePressure, the spread between China and the United States in 2016 May be narrowed.This may lead to further capital to accelerate out of China and hold down the yuan's exchange rate.
Integrated all factors, we think the RMB exchange rate will further decline in 2016.We expect the dollar to the yuan will rise to 6.9, the 9% depreciation will represent the current level.
"21st century" : depreciation impact on the United States?You have said before, the currency devaluation of the impact of the larger than the fed to raise interest rates, could you explain?
Woo: in our opinion, the prospects of the yuan will be from the perspective of macro and flow real earnings have a major impact on the United States.Beijing further loosening of monetary policy, this for a long period of time for investors to believe that the fed may be real interest rates will be kept in far lower than before the cycle.
It is important to note that the market expects U.S. real interest rate is the highest level before raising interest rates.There should be a higher rate in the United States, and China maintain a wider range of actual interest rate differentials.
We believe that in the past decade, the global saving glut and savings from high-risk private investors to low risk reserve managers is undoubtedly one of the main driving factors of low real yields in the United States.
However, the story is one of the most important aspect is that China's foreign exchange reserves.China is the largest single holder of America's, but the recent significant capital outflows.Is also for this reason, China's reserves fell after will directly affect the fed's bond prices held by them.
Along with the economic slowdown, capital outflows acceleration and currency becomes more unstable, in 2015 the importance of China to developed markets has risen sharply.The technology spillover effect is likely to further strengthen in 2016, especially when we believe that China will sacrifice onshore renminbi stable for more control of the monetary policy.
"21st century" : in addition to the outside of the United States developed economies monetary policy?
Woo: the central bank to raise interest rates in other developed economies is still a long way to go, especially in Europe, and Japan, they are still in the model of quantitative easing.The European central bank is
ready to start a new round of quantitative easing, the bank of Japan is likely to continue to consolidate its massive expansion of the balance sheet.Only the bank of England is likely to raise interest rates, but the England's exit from the eurozone risks, its most important trading partners in the euro zone there are risks.
"21st century" : expect emerging market status?
Woo, weakening China's growth, that is why goods might maintain complex movements of important reasons.China is such an
importantcommoditiesConsumer, China's growth to slow down, energy and metals seems will be in the medium term remain a downturn.Many Asian emerging market currencies will end appreciation to against a weaker renminbi yuan, we believe that the emerging market currencies basic in a bear market in 2016.