The Central Bank might Alter the Exchange Rate Intervention Strategies

In December, the foreign exchange reserves has declined $107.9 billion, the central bank might alter the exchange rate intervention strategies. Market rumors about the central bank in China is that the central bank might buy large amount of RMB from large state-owned banks to support the RMB market. However, under the stronger develuation trend of RMB, the central bank must consider the pros and cons of currency intervention. A Hong Kong bank currency trader analysis said. Due to the recent weakness in RMB, the central bank might not able to achieve the desired results by consume large amount of foreign exchange reserves. The central bank is likely to change the exchange rate intervention strategies from control the magnitude of devaluation, devaluation rhythm. 

January 7, the latest People's Bank of China's foreign exchange reserves data showed, in December 2015 the balance of foreign exchange reserves to $ 3.3303 trillion, $ 107.9 billion decline the previous month. In the asset management unit Merchants Bank analyst Liu Dongliang opinion, the reason why foreign exchange reserves fell more than the market expected, mainly due to capital outflows accelerated. After all, last December, the dollar index finished lower, so that non-US currencies rebound, so the valuation of foreign exchange reserves is not exchange rate losses, but also in the yuan to join SDR, the intensity of the central bank intervention in currency markets stable RMB exchange rate has decreased, thereby It brings the amount of consumption of finite reserves.

In the industry view, the so-called capital flight accelerated, in addition to domestic residents to invest in overseas dollar continued tide, and during the end of the domestic enterprises have to raise dollars going to early repayment of foreign dollar-denominated debt, avoid higher foreign exchange losses caused by the devaluation .

Bloomberg data show that China's dollar-denominated debt issued by financial institutions and corporate bonds, loans and other outstanding balance of approximately $ 581.4 billion, every 1% depreciation against the dollar, it means that these institutions can only pay the equivalent of 58.14 million yuan to pay dollar-denominated debt, between the invisible increased the financial burden of companies.

In a Hong Kong bank foreign exchange trader opinion, is the enthusiasm of enterprises to purchase foreign exchange debt in advance, leading to the devaluation of the RMB is facing a relatively high pressure. Especially in the offshore RMB market, as the yuan and the dollar is freely convertible, so many domestic enterprises by RMB trade items from inside to outside, and then converted into US dollars debt to prepare in advance.

Merrill Lynch even believe that buying up the dollar against six offshore RMB forward exchange rate, foreign exchange transactions in 2016 will be the first choice.

On the 7th day, the RMB exchange rate fell 332 basis points impact, offshore RMB against the US dollar (CNH) plunging more than 600 basis points to around 6.76 minimum, but then drastic changes in the market, buying large single mysterious RMB It emerged, within half an hour lie offshore RMB bounce up more than 800 basis points, to around 6.6785, inside and outside the RMB exchange spreads from the highest compression over 2000 basis points to 1000 basis points.