A Study of the Pricing Power of RMB Exchange Rate in Domestic Interbank Foreign Exchange Market

Based on the data of domestic RMB foreign exchange spot rate, Hong Kong RMB offshore foreign exchange spot rate and central parity rate of RMB foreign exchange, this paper researches the pricing power of domestic foreign exchange market. The results of the paper show that the domestic foreign exchange market has a certain pricing power of RMB exchange rate, and there is a mutual influence between the domestic market and the Hong Kong offshore RMB market; the increase in daily fluctuation of domestic RMB foreign exchange reinforces the pricing power. The pricing power of domestic foreign exchange market is not fully assigned by regulatory institution. The formation of domestic RMB foreign exchange rate has some market basis, which can reflect market supply, demand and expectation to some extent. The central parity rate of RMB foreign exchange is significantly exogenous. According to the above results, the paper argues that the market-oriented formation mechanism of foreign exchange rate is the foundation to reinforce the pricing power of domestic RMB foreign exchange rate.