01

Yesterday, the exchange rate of the Chinese yuan experienced a stunning reversal in both the offshore and onshore markets, with an increase of more than 700 points.

In the face of pressure from the adjustment of the yuan's exchange rate, our country has intervened several times. At the end of August, central bank bills were issued through the Hong Kong market, and at the beginning of September, the central bank reduced the foreign exchange reserve requirement ratio.

However, it was somewhat surprising that the US dollar index rose sharply during this period, suppressing the exchange rates of various countries. This also led to a significant decline in the yuan last week.

Finally, yesterday, the management held a foreign exchange self-discipline mechanism meeting in Beijing, once again announcing a clear signal to the outside world that it would not allow the yuan's exchange rate to fluctuate too much and continue to maintain the basic stability of the exchange rate.

As soon as this news came out, from 9:00 to 11:00 in the morning, in just two hours, the offshore yuan exchange rate rose sharply.

Throughout the trading day, whether it was onshore or offshore yuan, the maximum increase exceeded 700 points.

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Among them, the exchange rate of the offshore yuan returned to within 7.30, and the onshore yuan exchange rate also approached 7.26.

02

Recently, the decline of the yuan is closely related to the rise of the US dollar.The US dollar has experienced a continuous rally, with an eight-week streak as of last week, marking the longest consecutive weekly increase for the US Dollar Index in recent years.

As a result, non-US currencies have plummeted, with the Japanese yen suffering the most significant decline.

The rise in the US Dollar Index is related to the excellent performance of domestic economic data in the United States during this period, with the GDP growth rate for the third quarter of this year potentially reaching an annualized 5.9%.

An increasing number of US officials believe that the US economy will not experience a recession but will achieve a soft landing.

Additionally, US authorities believe that inflation in the country has significantly eased, falling from a peak of 9.1% in the middle of last year to 3% this year, demonstrating the effectiveness of the Federal Reserve's monetary tightening policies.

However, many of the US data points may have already peaked, with the best times now behind us and a worse period ahead.

Considering the GDP from the previous two quarters, it is indeed possible for the third quarter to be slightly higher, but the chance of achieving a 5.9% growth rate is very slim.

More importantly, numerous Wall Street investment banks believe that from the fourth quarter through the first half of next year, the US GDP growth rate will noticeably slow down, and there could even be a negative value, indicating a recession.

Some analysts now believe that the US could achieve a soft landing, but many others think this view is overly optimistic. Historically, there has been no exception when it comes to the inversion of long-term US Treasury yields, and the US is inevitably heading towards a recession.Additionally, the international oil prices have remained high recently. The Consumer Price Index (CPI) in the United States increased from 3.0% to 3.2% last month and may further rise to 3.6% this month. Consequently, it appears that the Federal Reserve's goal of controlling inflation to 2% as soon as possible is clearly challenging to achieve.

There is a key reason for this situation: the high inflation base in the United States last year, which led to a relative decline in this year's year-on-year inflation data. By the end of last year, the growth rate of the inflation base in the United States had slowed down. With the continuous increase in the current month-over-month CPI in the United States, it is inevitable that the year-on-year data will rise again in the second half of this year.

It is believed that American economists and officials from the Treasury and the Federal Reserve must understand this principle, but they deliberately choose to turn a blind eye in public statements.

Regarding the exchange rate of the Chinese yuan, there is actually no need to worry too much. By making a horizontal comparison, we find that although it has depreciated against the US dollar, it has actually appreciated against other major non-US currencies.

From the beginning of August to now, the yuan has appreciated by 1% against the Japanese yen, which means that under the pressure of the US dollar, the yen has depreciated more than the yuan.

During the same period, the yuan also appreciated by 0.1% against the euro and the British pound. Although the increase is not significant, it still indicates that the depreciation of the yuan is not the most severe.

Now, Japan may further shift towards a loose monetary policy, and the yield on Japanese government bonds has shown a noticeable increase. At the same time, the euro may still raise interest rates twice in the coming period.

This represents that the yen and the euro, respectively against the US dollar, will show a noticeable appreciation, and the US dollar index will fall accordingly.

It is possible that this wave of appreciation of the US dollar is the last one.