Benefit from the release of the low price suppression effect, the Federal Reserve's interest rate cut, and other internal and external factors, the Renminbi has entered a moderate appreciation channel, creating conditions for timely macroeconomic regulation.
"As the world changes, so should the laws," with the change in the global interest rate environment and the benchmark conditions of the Renminbi exchange rate, China's macro policy of "continuous effort and greater support" is ushering in a new opportunity.
We used a random forest model to analyze the impact of economic and financial variables such as foreign exchange reserves, China-US bond yields, and imports and exports on the US dollar to Renminbi exchange rate, and found that an increase in foreign exchange reserves is usually accompanied by the appreciation of the Renminbi, while China-US bond yields have a significant impact on exchange rate changes through cross-border capital flows.
Moreover, different price situations will change the relationship between these variables and the Renminbi exchange rate, providing a new perspective for understanding the interaction between exchange rates and market behavior.
The prediction results of the random forest model show that, thanks to the release of the low price suppression effect, the implementation of the Federal Reserve's interest rate cut, and the strengthening of China's counter-cyclical policies, the Renminbi has entered a moderate appreciation channel, which has helped to boost confidence and expectations, and created conditions for timely macroeconomic regulation.
The application of the random forest model in exchange rate forecasting plays a key role in the financial market, and effectively modeling and comprehensively evaluating many factors affecting the exchange rate is an important challenge.
We used the random forest model to predict the exchange rate changes of the US dollar to the Renminbi (USD/CNY) and analyzed the impact weight of different macroeconomic and financial variables.
With its non-linear characteristics and ability to handle high-dimensional data, the random forest model can fully capture the complex relationship between exchange rate changes and various variables.
Through this model, we can effectively quantify the impact of each variable on the Renminbi exchange rate.
Feature importance analysis shows (see Figure 1), foreign exchange reserves have the highest weight, indicating its significant predictive role in the change of the Renminbi exchange rate.
Next is the China-US bond yield, which has a strong explanatory power for cross-border capital flows and exchange rate fluctuations.
First, when using the random forest model for prediction, we found that the change in foreign exchange reserves is usually positively correlated with the appreciation of the Renminbi.
Specifically, when China's foreign exchange reserves increase, it usually indicates the appreciation of the Renminbi relative to the US dollar.
This is because an increase in foreign exchange reserves means that the country can intervene in the foreign exchange market more effectively and stabilize the value of its currency.
At the same time, the accumulation of foreign exchange reserves usually reflects the expansion of the trade surplus, and the inflow of funds drives up the demand for the Renminbi, thereby prompting the Renminbi to strengthen.
Second, bond yields also play a key role in the random forest prediction model.
The bond yields of China and the United States reflect the interest rate difference between the two economies, and this difference affects the exchange rate through capital flows.
When the bond yield in China rises, funds may flow to China to obtain higher returns, thereby promoting the appreciation of the Renminbi.
Conversely, when the US bond yield rises, the attractiveness of US dollar assets increases, and the outflow of funds puts pressure on the Renminbi to depreciate.
Therefore, the difference in bond yields is not only a reflection of investor behavior but also an important predictive indicator of exchange rate fluctuations.
The impact of price level changes on the exchange rate transmission mechanism in the random forest model, we found that the rise of CPI and PPI is usually corresponding to the depreciation of the Renminbi.
This finding is consistent with traditional economic theory: when the price level of a country rises, the purchasing power of its currency will decrease, leading to exchange rate depreciation.
At the same time, exchange rate depreciation may also be a market response to the intensification of inflationary pressures, especially when CPI rises rapidly, investors tend to be more cautious about the future performance of the country's currency, thereby promoting capital outflow and further increasing depreciation pressure.
On the contrary, when the price level falls, the currency of the country strengthens relatively, indicating that a low inflation environment may promote the return of capital, thereby pushing up the currency value.
Overall, the relationship between price levels and exchange rates is two-way and complex.
We used a group regression method to explore the relationship between various economic and financial variables and the Renminbi exchange rate (USD/CNY) under different price change patterns.
First, foreign exchange reserves have a significant impact on the exchange rate under various price change scenarios.
Especially when PPI is falling, the positive correlation between the increase in foreign exchange reserves and the appreciation of the Renminbi is the strongest.
Second, US bond yields only have a significant impact on the exchange rate when PPI is rising, showing that higher US bond yields lead to the depreciation of the Renminbi.
This may be because higher US bond yields attract capital to flow to the US market, increasing the demand for dollar assets, thereby causing capital to flow out of China and putting pressure on the Renminbi to depreciate.
However, the change in CPI has little effect on this relationship, mainly because CPI reflects domestic demand rather than international capital flows.
Third, China's bond yields significantly affect the Renminbi exchange rate in all scenarios, and the Renminbi appreciates relatively when China's bond yields rise.
This result indicates that the changes in China's bond yields have a continuous and stable impact on the Renminbi exchange rate, indicating that bond yields, as an important indicator of capital returns, have a long-term and stable impact on exchange rates.
Finally, the trend of price level changes plays an important role in the relationship between imports and exports and the Renminbi exchange rate.
On the one hand, when both CPI and PPI are rising, the increase in imports has a significant positive impact on the Renminbi value, while in other scenarios, the impact of imports is relatively limited.
Although an increase in imports will usually put pressure on the Renminbi to depreciate, if accompanied by economic growth or capital inflow, these factors may offset or even reverse the depreciation pressure, thereby promoting the appreciation of the Renminbi.
On the other hand, the support of export growth for the Renminbi value is particularly evident when CPI rises and PPI falls.
Due to the reduction of production costs, the international competitiveness of export goods is enhanced, promoting the growth of exports and bringing more foreign exchange income.
At the same time, the strong domestic demand diverts some production capacity to domestic demand, reducing export supply, thereby pushing up export prices and further supporting the appreciation of the Renminbi.
In addition, market expectations of Renminbi appreciation will accelerate foreign exchange settlement, which may promote the return of capital to China and further promote the appreciation of the Renminbi.
In the context of the rebalancing of domestic and external demand structure, the positive effect of export growth on the appreciation of the Renminbi is particularly significant.
Settlement is the result, not the cause.
Through the Granger causality test, we further explored the causal relationship between the Renminbi exchange rate and the settlement volume.
The results show that the settlement volume did not directly cause changes in the Renminbi exchange rate, but the fluctuations in the Renminbi exchange rate had a significant impact on the settlement volume, and it was found that there is a one-way causal relationship between the two, not mutual interaction.
First, when testing the Granger causal relationship of the settlement volume on the Renminbi exchange rate, all p-values from lag 1 to 4 are greater than 0.1, indicating that the settlement volume did not significantly cause changes in the Renminbi exchange rate.
This means that the fluctuations in the settlement volume cannot effectively predict the trend of the Renminbi exchange rate.
Second, the Granger causal relationship of the Renminbi exchange rate on the settlement volume is significant at lags 2 to 4, especially at lag 3, with a p-value of 0.049, which is below the 5% significance level.
This indicates that within these lag periods, the changes in the Renminbi exchange rate have a significant predictive effect on the settlement volume.
The underlying logic is that exchange rate fluctuations will affect the settlement decisions of market entities.
When the Renminbi appreciates, companies may increase settlements to lock in profits; on the contrary, when the Renminbi depreciates, companies may delay settlements to avoid potential losses.
Therefore, the settlement volume is a response to the changes in the Renminbi exchange rate, and exchange rate fluctuations become an important reference factor for market entities to adjust their settlement behavior.
This one-way causal relationship indicates that changes in the Renminbi exchange rate are the key factor driving settlement behavior, and the settlement volume is more the result of exchange rate fluctuations, not the cause.
The Renminbi has entered a moderate appreciation channel.
We used the random forest model to conduct 1000 prediction simulations, and the results show that the central range of the Renminbi exchange rate in the next 12 months is relatively clear, and it is expected to fluctuate between 6.8 and 6.9, and the Renminbi has entered a moderate appreciation channel.
The increase in foreign exchange reserves is the key factor driving the appreciation of the Renminbi.
This year, China's trade surplus situation is good, with a trade surplus of 608.49 billion US dollars in the first eight months, a year-on-year increase of 11.2%, which has promoted the steady rise of foreign exchange reserves, reaching 3.2882 trillion US dollars by the end of August.
On the other hand, in a low inflation environment, the appreciation pressure brought by the increase in exports to the Renminbi is not significant, and the subsequent counter-effect on export performance is relatively small.
At the same time, with the Federal Reserve's interest rate cut in September, the downward trend of US Treasury bond rates will also moderately promote the strengthening of the Renminbi.
Secondly, a positive cycle between moderate appreciation and moderate inflation is expected to be formed.
When shifting from low inflation to moderate inflation, the results in Table 1 show that the impact of both the increase in imports and the downward trend of US Treasury bond yields has changed from insignificant to significant, and the internal and external support for the Renminbi value will be further strengthened, thereby forming a virtuous cycle between moderate appreciation of the Renminbi and moderate inflation.
Third, in the process of moderate appreciation of the Renminbi, maintaining the stability of China's bond rates is crucial.
At present, the counter-cyclical regulatory strength of monetary policy is strong, the bond issuance plan is large, and the issuance speed is expected to accelerate, which will continue to provide ample liquidity for the stable operation of the bond market, thereby supporting the stability of long-term bond yields, and thus helping to promote the moderate appreciation of the Renminbi.
Finally, the moderate appreciation of the Renminbi will open up a broad space for policy to add strength.
Thanks to the release of the low price suppression effect, the implementation of the Federal Reserve's interest rate cut, and the strengthening of China's counter-cyclical policies, the Renminbi has entered a moderate appreciation channel, providing support for boosting confidence and expectations, and creating favorable conditions for "macro policy to continue to exert strength and be more powerful."
In the interest rate cut cycle, as the interest rate differential between China and the United States gradually narrows, global investors may shift from high valuation markets to low valuation markets, and the changes in geopolitics and the continuous advancement of China's high-quality development will further enhance the attractiveness of Chinese assets, and global funds are expected to increase their allocation to the Chinese market, further supporting the Renminbi value.当然可以，请提供您需要翻译的内容。
