RMB exchange rate, swaps, options
Market review: In the second quarter of 2024, the US dollar exchange rate and interest rates fluctuated, and the closing price of the US dollar against the yuan rose moderately under the traction of the middle price, and the three major RMB indices appreciated. The swap point fluctuates, and the implied volatility of the short-term term option falls. Long-term swap points have fallen, and the spread between domestic and foreign forward swaps has widened. The implied volatility spread of onshore and offshore options rebounded. SGX futures holdings have risen significantly in the past month.
Outlook: Spot exchange rate: The external pressure on the US dollar interest rate exchange rate increased in the third quarter, and the objective pressure on the RMB increased due to the superposition of dividend purchases. Countercyclical instruments make the RMB low volatility and make the carry trade more attractive. In the future, countercyclical tools will need to continue to deplete, which will increase the volatility of USD/CNY. We measure the impact of the rate of adjustment of the central parity on the spot exchange rate. Derivatives: The swap pivot is likely to fall further. If the margin of countercyclical instruments eases, the spread between domestic and foreign swaps is expected to fall, and the implied volatility of options is expected to rise.
Strategy recommendation: Please refer to the text for details of specific hedging strategies and points.
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