Since the beginning of June, the unilateral appreciation of the renminbi against the US dollar has reversed. Facing the two-way volatility of the renminbi, those continuing to bet on a one-way appreciation of the renminbi will undoubtedly pay for their misjudgment.

Although the flexibility of the renminbi's exchange rate is expanding, many still think it will appreciate against the dollar in the long run. But even those holding a bearish view on the dollar cannot deny that the renminbi's exchange rate is being affected by multiple destabilizing factors and uncertainties.

Although the US Federal Reserve considers it to be temporary, with the emergence of more and more inflationary pressures, the market's expectation of monetary policy tightening by the Fed is increasing. Any change in the Fed's stance would have important implications for global currency markets and cross-border capital flow patterns.

In fact, the dollar index has reversed and the renminbi started fluctuating after the Fed gave vague signals at its mid-month meeting that it might raise interest rates sooner rather than later. And if the US economy continues to recover in the second half of the year, the renminbi may face more depreciation pressure.

The real risk is that, thanks to the ultra-loose policies implemented during the epidemic, the global financial markets have contributed to financial asset bubbles and increased vulnerability in the financial markets. If inflation gets out of control, there is bound to be a stampede in financial markets to hedge risks, directly affecting cross-border capital flows and the exchange rate of the renminbi.

China's real estate market is under strict regulation and the interest rates of certificates of deposit have been lowered. It is risky to bet on the substantial appreciation of renminbi assets. Regulators have also repeatedly stressed recently that the two-way fluctuations in the yuan's exchange rate will become normal due to the supply and demand and changes in the international financial market.

China's central bank has the tools to stabilize the renminbi exchange rate and prompt it to show a two-way fluctuation trend. For example, on May 31, the Chinese central bank claimed that the foreign exchange reserve ratio for financial institutions will be increased by 2 percentage points from June 15.

The market should not overestimate the risk of the US dollar. Unless there is a structural change in the international currency structure, the US dollar will not have major risks in the short term. However, the US policy to contain China and a change in the Fed's stance may have an impact on the currencies of emerging market countries at any time. So any bet on the renminbi's unilateral appreciation is irrational.