The RMB exchange rate fell below 7.1!

The main reason is found!

As of around 22:00 that day, the RMB-USD exchange rate in the domestic onshore market and the RMB-USD exchange rate in the overseas offshore market were hovering around 7.1105 and 7.1282 respectively. They hit the lowest point of the year at 7.1120 and 7.1325 respectively.

The editor below brings the RMB exchange rate below 7.1. I hope you like it.

The RMB exchange rate fell below 7.1. The domestic manufacturing PMI in May was lower than expected and the rise of the US dollar index in early trading may be the trigger for the RMB exchange rate to fall below 7.1. The underlying reason is the repeated expectations of the Federal Reserve to raise interest rates in June and the continuation of the weak recovery of the domestic economy.

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It is not clear that the Federal Reserve will suspend raising interest rates in June. Zhou Ji, a macro foreign exchange analyst at the Nanhua Research Institute, told 21 reporters that the market had previously believed that the probability of the Federal Reserve raising interest rates in June was not high, but recently it has significantly raised expectations for a rate hike in June.

, the U.S. dollar index broke through the 104 mark, thus putting pressure on the RMB exchange rate.

The reversal of market expectations stems from the entanglements and differences within the Federal Reserve.

So far, the Federal Reserve has raised interest rates 10 times in a row, raising the U.S. federal funds rate to between 5% and 5.25%, the first time it has risen above 5% since 2006.

The consequence of radical interest rate hikes is that since March 2023, the U.S. banking crisis has continued to ferment. So far, four banks, Silvergate Bank, Silicon Valley Bank, Signature Bank, First Bank and Bank of America, have collapsed one after another.

U.S. public opinion believes that continuing to aggressively raise interest rates may add fuel to the fire of the U.S. banking industry that is in crisis and bring the United States one step closer to recession.

In the early morning of May 4, Beijing time, the Federal Reserve announced its May interest rate resolution and policy statement, announcing a 25 basis point interest rate hike, in line with market expectations.

It is worth noting that this statement specifically deleted the wording about "appropriate further interest rate increases", saying that the degree of tighter monetary policy depends on economic conditions.

The statement also reiterated many times that it will take into account the several tightenings since this round of interest rate hikes and the lag in the transmission mechanism to determine "the degree of additional policy tightening in the future."

Some market participants interpreted this statement as a signal that interest rate hikes may be suspended in June.

It is reported that in the early morning of June 15th, Beijing time, the Federal Reserve will announce its June interest rate decision.

However, in the early morning of May 25, Beijing time, the Federal Reserve released the minutes of its May monetary policy meeting, saying that most Fed officials said they were ready to suspend interest rate increases, but some believed that "it may be necessary to further raise interest rates at future meetings."

Tighter policy" as "progress towards a return to 2% inflation may continue to be unacceptably slow".

In the last few weeks of May, a number of Fed officials publicly stated that the tightening cycle may not be over.

For example, Loretta Mester, President of the Federal Reserve Bank of Cleveland in the United States, refuted the view that "the June meeting will give up raising interest rates", saying that there is currently no "compelling" reason to suspend interest rate increases.

But Mester was not a voting member this year.

Minneapolis Fed President Neel Kashkari, a voting member this year, said he was open to not raising interest rates in June, but warned that "a pause in interest rate hikes in June does not mean tightening."

The cycle is over."

Former U.S. Treasury Secretary Summers also believes that U.S. inflation seems to be stuck at 4.5%-5%, which is more than twice the Fed's 2% target.

Given that the Fed has raised interest rates ten times in a row and that the banking crisis has less of a dampening effect on the economy than expected, this means that the Fed may have to further raise the federal funds rate to alleviate price pressures.

What does a decrease in the RMB exchange rate mean? A decrease in the RMB exchange rate means that the RMB has appreciated. A decrease in the RMB exchange rate means that the amount of 1 U.S. dollar against the RMB is reduced.

For example, 1 U.S. dollar could be exchanged for 8 yuan in RMB in the past. After the exchange rate dropped, 1 U.S. dollar can now only be exchanged for 6 yuan in RMB. This shows that the RMB has appreciated against the U.S. dollar.

The appreciation of the RMB may lead to the inflow of foreign capital, which will be beneficial to the A-share stock market. In addition, it will also have a certain impact on import and export companies: the appreciation of the RMB means the depreciation of the currencies of other countries. The same thing will have a certain impact on other countries.

It used to cost only 8 yuan, but now it costs 10 yuan. Therefore, for these companies, the cost increases and they do not choose to import, so it is not conducive to our country's exports.

On the other hand, if the RMB appreciates, for our country, it may cost 10 yuan to buy something in the past, but after the appreciation, the same thing may only cost 8 yuan, so the cost paid by enterprises that trade and import will be reduced, so it is good for imports.

enterprise.