On August 31, 2016, the CFETS RMB exchange rate index closed at 94.33, losing 1.06 percent from the end of July; the RMB exchange rate index based on the BIS basket and the RMB exchange rate index based on the SDR basket closed at 95.04 and 95.11 respectively, losing 1.10% and losing 0.92% from the end of July.
In August, the RMB exchange rate index showed a generally steady trend. Still affected by the strong foreign exchange demands raised from summer-vacation travel and overasea education, the RMB exchagne rate index had fallen slightly in early and middle August, and the CFETS RMB exchange rate index once decreased to 94.06. However, by the end of August, the CFETS RMB exchange rate index rebounded to 94.33, fluctuating within a narrow band during the whole month. With regard to volatility, in August, the annualized volatility of the CFETS RMB exchange rate index was 3.13%, significantly lower than that of the USD/CNY central parity, which was 5.01%
With regard to the RMB/USD bilateral exchange rate, in early and mid-August, global FX market remained relatively stable, and both USD/CNY central parity and close rate keep fluctuating bi-directionally with larger flexibility. Since late August, with the Fed Chair Yellen and some other board governors keeping releasing rate hike signals, the market expectation of rate-hike was reinforced, and the US dollar strengthened again. Under the“previous close + movements of a basket of currencies”mechanism, the RMB/USD bilateral exchange rate depreciated accordingly. Overall, the RMB/USD exchange rate continued operating orderly based on the“previous close + movements of a basket of currencies”mechanism with increasing flexibility.
