It is better to raise the flexibility of RMB exchange rate than to pay too much

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      The market is concerned about whether the RMB will break through key points, reflecting market anxiety. Regulators can stabilise market expectations in the short term through public cries, but if the market continues to move in one direction, the marginal effect of cries is expected to continue to decline; if exchange rate flexibility is enhanced, the cost of unilateral bets increases, unilateral expectations will be shared. Change.
From a trading point of view, market expectations are unlikely to change easily if the trend is stable and well-directed, and bearish expectations are bound to accumulate if unilateral bets on continued earnings are made; as of September, regulators provided liquidity to the market, but depressed real volatility, which in turn raised market depreciation expectations and stimulated it. The demand for foreign exchange in the market is more obvious.
According to the change of RMB option implied volatility curve (one-month period), the RMB-US dollar smile curve at the end of May is basically symmetrical, indicating that the market has no obvious expectation of appreciation and depreciation; with the rapid fall of spot exchange rate, the volatility smile curve moves up, and the call option volatility rises more significantly. It shows that the expectation of RMB depreciation is rising gradually.
The actual volatility was artificially depressed, and the smile curve at the end of September was significantly higher than in May, and the volatility curve at the end of October was significantly steeper, suggesting that the unilateral bet on breaking seven continued to increase; but the current situation is much better than the depreciation forecast at the beginning of January 2017.
If the chart shows a clear two-way fluctuation, rising volatility will raise the cost of betting, and "three positive lines change expectations" is still very useful, change expectations can start from the chart.
Market participants have repeatedly called for greater exchange rate flexibility to be the best way to defuse unilateral bets, and is an acceptable way for the market to shout without changing the exchange rate trend, and the ultimate effect will be discounted.


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