Real effective exchange rate of RMB even fall in March

In May this year, China's real effective exchange rate fell by 2.43%, the latest effective exchange rate, which was the third consecutive month of a fall in the real effective exchange rate since March, the BIS recently announced.　　A further review of historical data found that, in the first 5 months of this year, only the real effective exchange rate rose 6.78% in February, the remaining 4 months have a certain degree of decline. The effective exchange rate is usually divided into nominal effective exchange rate and real effective exchange rate.　　It is understood that the real effective exchange rate not only takes into account the relative movements of all bilateral nominal exchange rates, but also excludes the effect of inflation on the value of the currency itself, which can reflect the external value and relative purchasing power of the national currency in an integrated manner.　　Bank Exchange analysts believe the renminbi has fallen sharply against non-dollar currencies as the dollar weakened significantly in May and the renminbi's imminent market continued to peg to the dollar.　　Data show that the dollar index fell 6.53% in May, because the renminbi against the dollar, the immediate exchange rate is basically stable, resulting in a 2.34% depreciation against the yen in May, the renminbi depreciation margin of 4.71% against the euro month. Peng, head of China research at Barclays Capital, said that in the first quarter, the outlook was uncertain due to a sharp slowdown in economic growth, coupled with a strong dollar that led to a passive appreciation of the renminbi's effective exchange rate. However, in the two quarter began to rebound in the domestic economy, growth prospects significantly improved, easing the pressure of devaluation. Meanwhile, as the dollar weakens against other currencies, the renminbi's effective exchange rate is passively devalued.　　In the case of a weaker dollar, maintaining stability with the dollar helps to eliminate the passive appreciation caused by the dollar's strength earlier than before. Peng further points out that the next 12 months against the dollar will depend largely on domestic economic growth and the dollar's exchange rate against other currencies.　　In the early days of economic growth recovery, the dollar was generally weak, and maintaining a basic stability against the dollar could lower the effective exchange rate and support exports.　　According to the data, China's exports fell by 26.4% in May from a year earlier, with imports falling 25.2% per cent year-on-year, with a trade surplus of $13.389 billion trillion. Referring to future exchange rate movements, Peng said that the renminbi's reference to a basket of currencies would increase as the growth rate reverted to a higher level, thus reducing the value of the effective exchange rate weakening with the dollar. The renminbi is under pressure to appreciate slightly against the dollar over the next year, based on a weaker outlook for the dollar's future.