- The onshore and offshore exchange rates of the Chinese yuan against the US dollar both fell below the 6.79 mark during trading, reaching a more than half-month low. This was mainly due to the strengthening of the US dollar driven by strong US non-farm payroll data for May, which led to a global adjustment in risk asset prices.
- The People's Bank of China announced today that the central parity rate of the yuan against the US dollar is set at 6.8198, which is about 250 basis points stronger than market expectations. This indicates that the regulators are using the central parity rate window to release counter-cyclical adjustment signals, effectively curbing the expectation of one-sided depreciation.
- Strong labor market data has led the market to expect the Federal Reserve to maintain high interest rates for a longer period. The probability of a rate hike in December, as shown by the CME FedWatch, has risen sharply from 45% last week to over 70%, resulting in a noticeable valuation adjustment in the Asia-Pacific stock markets.
Strong Non-Farm Data Triggers Global Forex Market Reassessment
The global foreign exchange market volatility has significantly increased due to the strong growth in US non-farm employment for the third consecutive month in May. The robust labor market data suggests that the US economy is regaining momentum after a previous slowdown, directly weakening market expectations for the Federal Reserve to shift to a more accommodative policy. Analysts from institutions like Capital Economics believe this employment report provides data support for some officials advocating against the Fed's dovish stance. Against this backdrop, the US dollar index hovers near a two-month high in the international market, with non-US currencies generally under pressure, and the yen further approaching a sensitive range that might trigger official intervention.
Central Parity Rate's Counter-Cyclical Guidance Shows Stabilization Intent
Facing external pressure from a stronger US dollar, the People's Bank of China has shown a clear intention of counter-cyclical adjustment in setting the central parity rate. Today's central parity rate of the yuan against the US dollar is set at 6.8198, slightly down from the previous trading day's 6.8157, but still not breaking the 6.82 mark. This rate is about 250 basis points stronger than the forecast value calculated by Reuters. Traders generally believe that the stronger-than-expected central parity rate effectively anchors prices in the onshore spot market, indicating the regulators' clear attitude towards maintaining basic stability in the foreign exchange market. As a result, after breaking the 6.79 mark, the decline in both onshore and offshore markets has narrowed to varying degrees.
Seasonal Settlement Demand Limits Downward Space for Exchange Rate
Despite the strong external US dollar environment, the settlement demand in the onshore market remains resilient. Feedback from traders at Chinese and foreign banks shows that market participants are still actively seeking to settle foreign exchange at current levels. Many companies choose to release dollar liquidity when the yuan rebounds to around 6.79, and this strategy of buying the yuan on dips provides key support for the exchange rate. The Financial Markets Department of Ping An Bank pointed out that in the short term, the focus will be on the resistance level at 6.80 for the US dollar against the yuan. If external pressure increases and this resistance level is breached, the fluctuation range may shift upwards to between 6.80 and 6.82; if not breached, there remains strong support around 6.76.
Interest Rate Expectations Restructuring Causes Cross-Asset Pressure
The repricing of the Federal Reserve's rate hike probability has significantly squeezed the premium on global risk assets. The Financial Markets Department of China Merchants Bank pointed out that the resilience of the US economy and the stability of the job market indicate a clear decrease in the necessity for rate cuts, and it is expected that the high-interest-rate environment will persist for a longer time. As a result, the Asia-Pacific stock markets collectively performed poorly on Monday, with the Korea Composite Stock Price Index triggering a 20-minute trading halt due to a sharp drop, and Japan's Nikkei index falling more than 3% in early trading. Last Friday, the Nasdaq index in the US stock market had already adjusted, led by the semiconductor sector. The macro-level high-interest-rate expectations are forming a dual constraint on emerging market currencies and equity assets through capital flow channels.
