(Yicai Global) Jan. 2 -- On Aug. 11, 2015, the reform of the yuan exchange rate triggered fierce volatility in the world’s foreign exchange market. In 2017, the yuan was expected to play catch-up after a year of depreciation. As of the last transaction day of 2017, the yuan to dollar rate was 6.5067, up nearly 6.3 percent within one year.
However, exchange rate reform has not come to an end. Looking back on 2017, what progress has been achieved? How will the offshore spillover effect impact the trend of the yuan? In the future, how will the exchange rate reform proceed?
The introduction of counter-cyclical factors has completely disrupted expectation on the depreciation of yuan. “However, the influence on the opening price in the next day by the overnight closing price has been mitigated,” Director of International Investment Research Office, Institute of World Economics and Politics, Chinese Academy of Social Sciences Zhang Ming told Yicai Global. “Looking ahead, the exchange rate reform based on the market supply and demand shall continue to be promoted.”
There are two options for the future exchange rate reform. One is to allow wide swings in China Foreign Exchange Trade System (CFETS) index. For example, only if the index remains between 90 and 100, will the central bank not intervene. The other is to come back to the “Double-Anchor,” the central parity rating policy, and lift the weight on the closing price from 50 percent to 75 percent, Zhang said.
This year’s dollar index will stay rangebound above 92 to 100, he said. Political risk factor within the Euro region will become additional driving forces for the US dollar and the dollar to yuan might fluctuate between 6.6 and 6.8, he said.
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