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Future trend of RMB-Easy credit

According to the credit data published on last Friday, the amount of credit in July increased by 1.45 trillion, an increase of 323.7 billion RMB year-on-year.

On Saturday afternoon, China Bank Insurance Regulatory Commission has published a special article about “To enhance the supervision and guidance, open up the transmission mechanism of monetary policy, and improve the economic level of financial services”. This article stresses that the bank should increase the credit supply and loan support for small and medium-sized enterprises.

Obviously, the transformation from easy money to easy credit has been realized in July. As the scale of credit expands further, the decline of the general lending rate and the notes financing rate will further accelerate, and the economic will gradually be stabilized.

Reduction of interest

According to the statistics published by the Central Bank, it shows that money market interest rate has continued to fall in the past two months. Last week, the rate of bank overnight was 1.622%, and the interest rate on August 7th closed at 2.450%. Both fell compared to the same period last week.

Forecast of exchange rate trend

Since the exchange rate is regarded as the value of one country’s currency in relation to another currency. Therefore, we have to look at the recent actions of the dollar in order to analyze the trend of RMB:

1) Expansion of national debt scale

Due to the increase in the US social welfare and the military spending, monetary policy of the United States is relatively tight. On July 30th, the U.S. Treasury Department said that it expects the third quarter debt to be $56 billion higher than previously estimated amount. The total debt is $329 billion.

2)Increase of government bond interest rate

“In general, what we’ve seen is the Turkish lira deprecation significantly against the dollar ... Trade tensions have kind of kept Treasury in a range for some time,” said Charlie Ripley, senior market strategist for Allianz Investment Management. “We also kind of expected more upward pressure on Treasury yields with the increased auction sizes, but it seems every time it seems to be met with demand. It’s sort of a head-scratcher.” 

Moreover, according to the recent statistics, the Fed’s increase of interest rate in September is a high probability event.

Forecast of RMB exchange rate trend

Hence it is obvious that China and the US have taken different methods. China has loosened the monetary policy and lowered the interest rate. On the contrary, the US has tightened the money supply relatively and raised the interest rate moderately. Therefore, through the analyses from all aspects, we conclude that the trend of the continued depreciation of the RMB against the US dollar will not end in the short term.