DEMANK FOR FOREX DECLINED, EXCESS OF FOREX SUPPLY OVER DEMAND INCREASED
Average daily turnover declined slightly
There were total 23 sessions of trade in July 2002, ending up with an accumulative turnover of 8.37 billion in US dollar term. The average daily turnover was US$364 million, down 4.6 per cent over June. The average daily turnover in July increased by 46.4 per cent as compared with the same period in 2001.
The average daily turnover of USD shrank moderately as compared with June, while those of HKD, JPY and EUR increased to some extent. Compared with the same period in 2001, the average daily turnovers of USD, HKD and JPY all increased significantly.
USD fluctuated, HKD was tending upwards in comparative stability, JPY and EUR followed a reversed-U path
USD fluctuated in July. It maintained the momentum of declining at the beginning, climbed up in the middle, and dropped again at the end of the month. The weighted average price of USD during July was 8.2770 on the first trading day, the highest price in the month, and the lowest was 8.2766. On the last trading day, the weighted average price of USD was 8.2767, four bps lower than 8.2771, that of end-June.
HKD was tending upwards with comparative stability in July. The weighted average price of HKD was 1.0606 on the first trading day. The weighted average price of HKD centred on 1.0605 in the first half of July and then frequented 1.0608 in the second half of this month, the lowest and highest price during this month. The weighted average price was 1.0608 on July 31, two bps higher than 1.0606, that of end-June.
Influenced by international market, JPY in domestic market went up and then declined in July. The weighted average price of JPY was 6.9145 on the first trading day of July. During this month, the lowest and highest prices were 6.8735 and 7.1410 respectively. The weighted average price of JPY fell below 7.0000 to 6.9021 at the end of July, 235 bps lower than 6.9256,the price at the end of June.
EUR moved in a pattern similar to that of JPY, i.e., going up and then declining in July. However, EUR trade was still inactive with no transactions on three working days in July. The weighted average price of EUR was 8.2274 on the first trading day in July. During this month, the lowest and highest prices were 8.0674 and 8.3595 respectively. On the last trading day of July, the weighted average price of EUR was 8.1400, 440 bps lower than 8.1840, the end-June price.
The excess of forex supply over demand continuously increased
Compared with June, both average daily supply and demand on the interbank forex market decreased moderately in July, but the demand declined far more than the supply, resulting in an increase of US$1.63 billion of surplus forex as compared with June. The average daily surplus increased by 15 per cent over June and by 82 per cent over the same period of 2001.
Summary of broking service of forex deposits
In July, eleven financial institutions were involved in the broking service of forex deposits with an accumulative turnover of US$51 million and 21 million. The periods were either one month or one week, and the funding rates were a bit lower than those on international markets.
Brief analysis
The national economy performed well in the first half of 2002. Reports from the National Bureau of Statistics of China indicated that GDP in the first half of 2002 was RMB 4,553.6 billion, up 7.8 per cent over last year. Growth accelerated from the first quarter to the second.
Surplus in foreign trade grew rapidly. The grand total of exports and imports in the first six months of 2002 was US$270.71 billion, with a trade surplus of US$13.41 billion, up 67.1 per cent over last year.
Foreign investment was more than expected. The contracted FDI rose a year-on-year 31.5 per cent in the first half of 2002 to US$ 43.99 billion, and the utilized FDI increased by 18.7 per cent to US$24.58 billion.
Depreciation of USD is benefical to China's exports in the short run. However, depreciation of USD will hamper imports, thus negatively affecting tariff revenue and the introduction of technology and equipment into China. Moreover, under the circumstance of USD depreciation and an unstable international financial market, more international capital will flow into China, leading to a larger surplus in China's balance of payments, and hence a rapid increase in the RMB currency base to balance the increase in forex reserve.
(by Zhang Shengju)