According to domestic media reports, the RMB exchange rate in the foreign exchange market has weakened, and the risk reserve ratio of forward sales has dropped to 20%. According to the First Financial Reporter, in order to prevent financial risks, the People's Bank of China decided to levy a risk reserve of 20% on the difference in forward foreign exchange sales from May 15, 2020, and turn it over to the state treasury. In the opinion of analysts, the purpose of raising the risk reserve ratio of forward settlement and sale of foreign exchange is mainly to prevent RMB exchange rate risk and reduce the hedging cost of enterprise's forward settlement and sale of foreign exchange risk. Therefore, raising the risk reserve ratio of derivatives this time is conducive to reducing the risk exposure of enterprises' forward foreign exchange sales business.

1. Why is the RMB exchange rate so weak under the strong dollar?

From the second half of 20 19, the exchange rate of RMB against the US dollar showed a trend of rising first, then falling, and unilaterally appreciating. At the end of 20 19, the exchange rate of RMB against the US dollar peaked at around 6.86 and began to fluctuate downward. Since April this year, it has continued to depreciate by more than 2%. Recently, the central bank has frequently intervened in the market. On the morning of May 15, the central bank announced that it would levy a risk reserve of 20% on the difference in forward foreign exchange sales from May 16.

2. What are the costs of selling foreign exchange in the future?

Assuming that the transaction amount of forward sale of foreign exchange is USD 65,438 +0, if the exchange rate is 6.8, the difference of forward sale of foreign exchange requires a risk reserve of 20%. Because this reserve is levied when trading forward products, and many enterprises do not hedge their risks in actual transactions. This will lead to a series of costs: first, the foreign exchange risk exposure is large; Second, the cost borne by banks is too high; Third, part of the bank's own business faces the risk of foreign exchange settlement and sale.

3. What will be the impact of raising the risk reserve ratio of RMB derivatives this time?

According to authoritative sources, in the forward sale of foreign exchange, the exchange rate risk that enterprises will face mainly includes two parts: forward sale of foreign exchange and forward purchase of foreign exchange. Therefore, to a certain extent, it increases the hedging cost and exchange rate manipulation cost of enterprises. Especially since the end of February this year, when the US dollar index has risen by more than 30% and a series of major international currencies have fallen sharply, enterprises need more exposure when choosing to purchase foreign exchange to hedge foreign exchange risks.