RMB Should Find Its Own Market Clearing Price.

The RMB trend has recently become the focus of the financial market. In fact, since the June 24th referendum in the UK, the RMB exchange rate has fallen by 1.7%, leading to the Asian currency as the central bank allowed the RMB to go down against the US dollar.

In recent months, the new normal of the renminbi has been gradually increasing without triggering other currencies to depreciate and not affect market sentiment.

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Yesterday, the central parity of RMB against the US dollar was 6.6950 yuan, the weakest since October 2010.

In the overseas non deliverable forward foreign exchange (NDF) market, the US dollar / RMB variety was reported at 6.8465 for a year and 6.854 at the end of Monday.

Hongkong's offshore renminbi against the US dollar was reported at 6.703 on Monday, late on Monday.

Recently, because of the strong data of us non farm employment, the market still expects that the FED will raise interest rates in the year to boost the US dollar index.

Agencies such as Bank of America, UBS, Goldman Sachs (GoldmanSachs) and Royal Bank of Scotland Group PLC last week lowered the expected level of the RMB against the US dollar to 7 yuan to 1 U.S. dollars, which is even lower.

From the perspective of volume, recent

The two sides are fighting fiercely. Bloomberg data show that the recent battle between the two sides of the RMB has become increasingly fierce.

On Monday, the US dollar increased 39% to 31 billion 800 million US dollars against the onshore renminbi, which is 47% higher than the average of 21 billion 600 million dollars in the past 3 months.

China's best solution is to let the renminbi find its own market clearing price, according to faxing.

This is not a science that can be accurately calculated. It can only guess the approximate level.

According to FA Hing, this level has dropped from 6.8 to 7.1.

The recent devaluation of the renminbi appears in the absence of a significant appreciation of the dollar. It may indicate that the Central Bank of China has succumbed to pressure on capital flows and is willing to test the lower limit of the Yuan's depreciation.

Although continued depreciation may increase

But ultimately it helps to balance capital flows.

The secret of big business is secret.

So what are the tools used by these big companies to make short? We can take a look at the RMB short strategy given by France.

It is recommended to do more dollars against offshore renminbi: at least one year, this trading strategy is very attractive.

Holding a 1 year call option spread price combination (6.85/7.20 exercise), selling a 1 year 6.55 put option: Based on the US dollar against offshore renminbi will continue to rise moderately, selling put option can significantly offset the long cost.

The US dollar and the offshore renminbi call option, which hold a 1 year 6.85, are knocked out in 8: the cost of the call option with a 1 year period of 6.85 is actually very high, and the breakeven point is not attractive (7.05).

However, if 8 of the knockout conditions are attached, it is 60% cheaper than the ordinary option, and the risk is only limited to the premium paid.

Short of RMB against CFETS basket: if you worry that the RMB against the US dollar trend is not good enough, then the trade weighted currency basket index is better.

The index fluctuated more smoothly than the renminbi against the US dollar, but it continued to decline.

Now the simplified CFETS index products have high liquidity and have been able to simulate the CFETS index made up of 13 currencies.