RMB Depreciation in recent weeks no reason for concern

china-rmb BEIJING, Oct. 20 (Xinhua) — The seemingly abrupt fall in the value of the Chinese currency against the U.S. dollar in recent weeks is mostly due to a strengthening dollar and such pressure will remain in the short term.

However, there is no ground for concern that the Chinese yuan would embark on a one-way street of devaluation, given that the fundamentals of the Chinese economy are sound and the internationalization of the RMB has steadily moved forward.

In anticipation of the rate hike by the Federal Reserve in December, the U.S. dollar index recently surged to its highest level since March.

Against such a backdrop, all the other major currencies have headed lower, including the Chinese yuan.

But it is noteworthy that while the RMB’s exchange rate against the dollar has reached the lowest in six years, it is gaining value against other currencies.

According to a Bloomberg report dated Oct. 17, the yuan slumped 0.8 percent against the greenback last week but rose 0.6 percent against a trade-weighted currency basket during the same period, registering its biggest advance in three months.

The Chinese currency has in the past experienced a long period of stable exchange rates and China’s reform to make its exchange rate mechanism more market-oriented will probably see higher volatility for the yuan.

That said, recent depreciation of the RMB against the dollar has only minimal impact on the domestic market and due to the strong macro-regulating capacity of the Chinese central bank, it is unlikely that the RMB will be mired in a messy devaluation.

Analysts believe that although the RMB will still be in a weaker position against the dollar in coming weeks, the room for continuing RMB depreciation is quite limited.

China has maintained a substantial surplus in its current account and it also has a huge foreign reserve. Meanwhile, its financial system is well-anchored compared to many other leading economies. Such factors decide that a long-term devaluation of the yuan is an unlikely scenario.

Moreover, the RMB’s internationalization and China’s ongoing endeavor to further open its financial markets will only bolster the currency.

Shanghai Gold Benchmark Price Was Born at 256.92 yuan / gram.

“Shanghai gold benchmark” refers to the Shanghai Gold Exchange Release pricing contracts, the RMB-denominated, delivery in Shanghai, the standard weight of 1 kg and fineness of not less than 99.99% gold bullion.
This market is a new price discovery mechanism in the global gold markets which formerly relied on Londons’ fix.

April 19 morning, the Shanghai Gold Exchange, the world’s first to the yuan -denominated gold standard price fix.

“Shanghai gold” reference price today was born, the first pen “Shanghai gold” benchmark price freeze at 256.92 yuan / gram.

The so-called “Shanghai gold fix” refers to the Shanghai Gold Exchange Release pricing contracts, the RMB-denominated, delivery in Shanghai, the standard weight of 1 kg and fineness of not less than 99.99% gold bullion, by the Shanghai Gold Exchange price system trading platform to achieve transaction.

 

The “Shanghai gold” reference price (Shanghai Gold Benchmark Price), refers to the “Shanghai gold” at the Shanghai Gold Exchange trading platform through a specified pricing “price to the amount of exercise,” the centralized trading, after reaching a market volume and price equilibrium, and ultimately the formation of RMB benchmark prices.

On the base price release ceremony held in the morning, the Shanghai Gold Exchange announced the pricing of 12 members and six members of the reference price list and a list of 18 international consultants.

China is the world’s largest gold producer and consumer countries, in which, the Shanghai Gold Exchange has nine consecutive years ranked inside the world’s largest gold spot Exchange floor at home and abroad gather important gold production, consumption, finance and investment companies. Therefore, the Shanghai Gold Exchange launched the “Shanghai gold” reference price will fully reflect the supply and demand of China’s gold market, representing the price trend of Chinese gold market, with use value; can be provided for the gold trading market, reliable RMB-denominated gold prices .

Meanwhile, China’s gold derivatives market has been the lack of yuan-denominated gold price point and authoritative fair, “Shanghai gold” The introduction of the benchmark price of gold will contribute to the development of China’s financial derivatives market, and will also be associated with gold financial products, financial products, and derivatives prices have a major impac