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Cailianshe News, August 22 (Reporter Liang Kezhi)On the evening of August 21, local time,FedThe minutes of the July monetary policy meeting were released. The minutes showed that Fed officials last month strongly preferred to cut interest rates at the September policy meeting, and several of them were even willing to cut interest rates immediately.

Affected by the news,US Dollar IndexIt fluctuated downward yesterday, breaking through the 101.00 mark and hitting an 8-month low. The exchange rate is currently trading around 101.20.

In contrast, the RMB exchange rate fluctuates less than the US dollar index, with onshore and offshore quotes fluctuating around 7.1300.

Many institutions believe that the rapid appreciation trend that began in July may have reached a temporary peak, and we must be vigilant against short-term adjustment risks.Nanhua FuturesIt is said that after the rapid appreciation of the RMB, the pressure of net outflow of cross-border funds in July was relieved and the corporate exchange rate increased, but the market still has differences on the future market and further observation of variable factors is needed.

Regarding the rapid appreciation of the RMB,BOC SecuritiesGuan Tao, the world's chief economist, recently said in a media interview that due to the fluctuations in the international market, the RMB is likely to appreciate rapidly and substantially due to the settlement of foreign exchange by exporters and the closing of carry trades. On the one hand, Chinese companies hold very considerable foreign exchange positions, and at the same time, the carry trades that shorted the RMB were also crowded. Although the willingness of exporters to settle foreign exchange has loosened, the expectation of RMB depreciation has not been fundamentally reversed; once the unilateral expectation fluctuates, it may trigger a sharp and rapid appreciation.

To this end, Guan Tao suggested that even if the Federal Reserve starts to cut interest rates and further open up ChinaMonetary PolicyChina also has room for development based on its own needs and does not necessarily have to follow the Fed.

The rapid appreciation of the RMB has more companies waiting to see the highest point for foreign exchange settlement

CICCAnalyst Ding Yajie believes that the trade surplus in goods in July was US$84.65 billion, which has declined from the previous month compared with June, but it will still support the RMB exchange rate. First, the absolute level of the current trade surplus in goods is still high. Second, even if the subsequent trade surplus may decline, the Federal Reserve is about to start cutting interest rates and the US dollar may gradually weaken. The unsettled funds accumulated in the early stage may gradually turn to settlement, which may in turn support the RMB exchange rate.

iFinD data shows that over the past year,Bank of ChinaThe exchange rate for customer settlement has been declining month by month, from a peak of 73% in August 2023 to 57% in June 2024, and then rebounded to 61% in July; at the same time, the foreign exchange sales rate rose from 65% in February 2024 to 75% in July.

The difference between the two (exchange rate settlement minus exchange rate sales) dropped sharply from 2% in August 2023 to -14% in July this year.

On August 22, Huatai Futures Research Institute reported that the market saw a phenomenon of buying low exchange in July. From the perspective of forward transactions, the amount of forward exchange settlement contracts signed by banks on behalf of customers in July increased by US$4.47 billion month-on-month, while the amount of forward foreign exchange sales contracts increased by US$1.22 billion. Enterprises maintained a relatively optimistic outlook on the RMB exchange rate. At the same time, the forward exchange settlement hedging ratio increased by 1.2 percentage points month-on-month to 6.8%, while the forward exchange purchase hedging ratio decreased by 0.05 percentage points month-on-month to 6.29%, further confirming that enterprises have increased their confidence in the RMB exchange rate in forward transactions.

Cailianshe reporters noticed that listed companies' confidence in the appreciation of the RMB has regained and they are gradually choosing opportunities to convert foreign currency into RMB.

likeCoss shares(300856.SZ) stated on the investor interaction platform on August 15 that the company's export revenue accounts for a high proportion, and it has been actively paying attention to changes in the foreign exchange market and doing a good job of foreign exchange settlement at the right time. In addition, the company will carry out foreign exchange derivative trading business according to actual conditions to reduce the impact of exchange rate fluctuations on the company's operating performance.

The exchange rate exposure has reached a seven-year high. Are there additional risks associated with concentrated exchange rate settlement?

Guan Tao pointed out that Chinese companies hold very considerable foreign exchange positions on hand. At the same time, the carry trade of shorting the RMB in the early stage was also relatively crowded. At present, the willingness of exporters to convert foreign exchange into RMB has loosened, but the expectation of RMB depreciation has not been fundamentally reversed. Once unilateral expectations fluctuate, it may trigger a substantial and rapid appreciation.

The Xingzheng Research Report also believes that the current settlement rate exposure is at a historical high. The report stated that in July 2024, the CarryTrade liquidation caused the yen to appreciate sharply, and the RMB followed the short-term rapid appreciation. The three major RMB indices fell back, and at the same time, the gap between the purchase rate and the settlement rate reached a high since 2017.

For market players, Zhang Meng, a researcher at Xingzheng Research, said that although the fundamentals do not support the trend of RMB appreciation, with the Fed about to start a rate cut cycle, the tight domestic US dollar liquidity has also eased marginally, and the third peak of the US dollar against the RMB has gradually become clear. At present, both foreign exchange purchase and settlement exposure need to be actively and flexibly hedged, especially the settlement exposure should no longer be overly exposed as in the previous two years.

Like Koss shares,Victory Precision(002426.SZ) stated on the investor interaction platform on August 13 that most of the company's business is settled in foreign currencies such as the U.S. dollar, and exchange rate fluctuations will have a certain impact on the company's exchange gains and losses. The company will conduct foreign exchange derivative trading business based on actual conditions to reduce the impact of exchange rate fluctuations on the company's operating performance.

Guan Tao believes that if the RMB can appreciate by 3% to 4%, the market will have no interest in earning interest rate differentials with the US dollar, because exchange rate fluctuations can wipe out all interest rate differentials. This opportunity may be favorable market conditions brought about by the closing of yen carry trades, or it may be that regulators take intervention measures similar to those of the Bank of Japan at a critical moment.

Regarding the relationship between the RMB exchange rate and the settlement rate,Zheshang SecuritiesChief Economist Li Chao believes that the current foreign reserves have a certain safety margin from its empirical warning line of US$3 trillion, but the balance of payments still needs to be closely monitored. The appreciation of the RMB exchange rate since the end of July may have boosted the sentiment of the real sector to convert foreign exchange into RMB, but its sustainability still depends on the certainty of the exchange rate stabilizing and recovering, and this process may still have great uncertainty.