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The foreign exchange market has been turbulent recently. As the financial blogger Wandianhao said: From the perspective of the US dollar, the depreciation should be good for international commodities, and the prices of gold, silver and crude oil should rise, but they actually fell; from the perspective of the RMB, we have just completed the interest rate cut, and the RMB should have depreciated, but it actually rose. So, what happened in the middle?

As you can see, the RMB suddenly exploded today. The onshore RMB and offshore RMB surged by 500 points and 600 points respectively. The offshore RMB rose by 360 points. How should we understand the sudden explosion of the RMB?

Our six major banks have just lowered their deposit rates, and the central bank has also unexpectedly cut interest rates. The MLF winning rate is 2.3%, 20 basis points lower than the MLF operation winning rate on July 15. Logically speaking, with the deposit rate cut, the RMB is under pressure, and the government bond yield is under pressure, the RMB should depreciate.

In this regard, Jinshi Zatan believes that there are several reasons: the first reason is that the risk of US stocks has increased sharply, and US technology stocks have plummeted, triggering the return of safe-haven funds to emerging markets, and the US dollar index has weakened. (Last night, the US July S&P Global Manufacturing PMI recorded 49.5, falling below the boom-bust line, hitting a 7-month low, coupled with the "Trump deal", the US dollar continued to weaken.)

The second reason is the expectation of RMB appreciation in the future. The Third Plenary Session of the 18th CPC Central Committee pointed out that the economic goals must be achieved within the year. Against the backdrop of the weak second quarter, the policy is expected to be strengthened in the second half of the year. However, this policy will affect the medium- and long-term trend, not the short-term trend like today. Therefore, this reason is not very convincing.

The third reason, which should also be the core reason, is the rapid appreciation of the Japanese yen.The appreciation of the yen is due to the intervention and interest rate hike by the Bank of Japan. The yen has appreciated rapidly, just soaring by 1%. The yen has risen against the US dollar for four consecutive times, and has soared by 6.45% since July. As the main asset after the weakening of the US dollar, the renminbi also has the demand for linkage appreciation.

The fourth reason, which is also the first reason that comes to mind, is that the Federal Reserve cuts interest rates, the dollar depreciates, and other major asset classes appreciate. As the possibility of Trump taking office increases, Trump has made it clear that he will increase oil production, which will undoubtedly bring forward the interest rate cut.

Therefore, due to the combined factors of risk aversion from technology stocks, risk aversion from a weakening US dollar, and appreciation of the Japanese yen, a lot of funds have been withdrawn from US dollar assets, resulting in indirect benefits for the RMB.

Finally, let me briefly say that gold has begun to weaken. Recently, gold has fallen rapidly from $2,484 to $2,373. The Fed's expected rate cut was brought forward, which should have been good for gold. Why did gold still fall?

There is a view that the reason for this round of gold appreciation is yen arbitrage, and Trump's coming to power broke this deal.

Carry trade refers to making profits by borrowing low-interest currencies and reinvesting them in high-yield assets. Since the Bank of Japan has maintained interest rates at low levels for a long time, the yen is often seen as one of the most attractive currencies in carry trade.

In the past, the Japanese yen has always maintained a low interest rate environment, and the interest rate gap between Japan and the United States was large. However, with the Bank of Japan raising interest rates, Trump's coming to power pushed for an earlier interest rate cut, and the interest rate gap between Japan and the United States narrowed, which was bad for the US dollar and good for the Japanese yen. With the narrowing interest rate gap, investors began to unwind carry trades, injecting a shot in the arm to the Japanese yen, which has been weak this year.

Market analysts warn that if the yen continues to appreciate in the thin summer market, it may lead to liquidation across assets, thereby increasing volatility and forced selling. If this is the case, the yen arbitrage, an important reason for the appreciation of gold, will disappear, and gold will also fall.

In fact, it is not only the reduction of yen arbitrage that is bad for gold, but also the Fed's interest rate cut. Since the beginning of this year, the speculation of the Fed's interest rate cut has caused gold to rise wildly, approaching the $2,500 mark at one point. However, as the interest rate cut came into effect, the good news for gold turned into bad news.