The decline of the RMB against the US dollar shows that the RMB has depreciated. People in China need to spend more money to buy goods priced in the same dollar. This will curb China's import trade and benefit China's export trade. However, in the long run, the fluctuation of RMB exchange rate is normal and it is conditional to maintain long-term stability. The same amount of RMB can only be exchanged for less dollars than earlier. This exchange rate has an impact on the country's exports. If the dollar is strong and people are more inclined to store it, then the desire to export will increase.
The essence of RMB exchange rate change
At the transaction level, the short-term pressure of RMB depreciation has been released to a great extent, and it will return to the fundamentals in the medium term. On the one hand, offshore and onshore spreads, swap rates, forward exchange rates and other indicators all show that the release of RMB depreciation pressure has been concentrated in a short period of time. On the other hand, in the option market, the difference between the risk reversal index and the implied volatility of the 3-month minus 1 month foreign exchange option also points out that the short-term depreciation pressure of RMB has been released to a great extent, and the pressure of rapid depreciation in the short term will be alleviated.