RMB Depreciated Continuously, Back To 6.6 Yuan Era

The People's Bank of China authorizes The China Foreign Exchange Trade System to announce that the central parity rate of RMB in the inter-bank foreign exchange market on April 29, 2022 is 6.6177 yuan per US dollar. It dropped 549 basis points from the previous day to 6.6 yuan.

In addition, the onshore and offshore RMB exchange rate against the U.S. dollar has also come to 6.6 yuan era.

There are many reasons for the recent depreciation of the RMB exchange rate, among which the most immediate factor is the continuous "hawkish" signals from the Federal Reserve, which leads to the increasing expectation of further interest rate hikes.

Against this backdrop, the DOLLAR index and Treasury yields both rose, with the DOLLAR index surpassing 100 for the first time since May 19, 2020. The strength of the DOLLAR index has put pressure on non-US currencies and the offshore RMB exchange rate has therefore come under downward pressure.

In the short term, the depreciation pressure of RMB may continue, but in the medium and long term, the possibility of continuous unilateral depreciation of RMB exchange rate is unlikely. The reason for this is that China's economy and financial sector remain resilient and dynamic, the fundamentals of long-term sound growth will not change, and there is no basis for a sharp depreciation of the RMB exchange rate against the backdrop of a double surplus in international payments.