ange rate has nothing to do with the price of banks shares. It does not accord with long term equilibrium condition; it can use the monetary policy in China to explain this phenomenon. When RMB appreciates, in order to prevent economic overheating and inflation, the central bank uses tighten monetary policy in the reverse operation, higher interest rates, which can lead to share price drop. So that in the short term, the currency has cast poison on the bank's share price, the exchange rate for the contribution rate of share price movements showed a trend of increase after decreases contribution rate between 1% and 17%, and there is a long-term and stable effect.
The policy suggestions of this paper are as the following: a. To perfect the exchange system, improve the RMB exchange rate functioning. Release normal to written demand, can eliminate long foreign exchange supply infinite expansion, the negative impact of unlimited increase in external exchange reserves, so as to reduce the pressure on the appreciation of the RMB. b. The government needs to establish capital flow to the dynamic monitoring and early warning mechanism, try to maintain the stable and orderly situation of the domestic financial market. As the RMB appreciating, arbitrage and speculative capital arbitrage frequenting will cause the volatility of the securities market, establish a complete set of domestic securities market on the international capital amount of monitoring and early warning mechanism, effective regulation of the securities market is advantageous to the financial authorities. c. Guide the reasonable expectations. Psychological expectations factors effect on the external exchange market and the internal stock market is becoming more and more obvious, China should increase the degree of information disclosure for ordinary investors and corporate investors, cultivate a correct investment idea, make it to our country foreign exchange market and stock market have an accurate understanding and even the whole economy, and form a reasonable expectations, improve the correlation of the external exchange market and internal stock market. d. Investors should remake their financial strategies, increase of exchange rate volatility risk awareness, reasonable to make investment decisions. e. Bank managers should be quickly identify the fluctuation of foreign exchange risk in a timely and effective manner, to establish the compliance risk prevention system, actively respond to fluctuations and its impact on the bank's share price. Commercial Banks must strengthen the exchange rate risk consciousness, to guard against exchange rate risks on the agenda. Chinese commercial banks should pay attention to the current exchange rate risk, firmly establish a modern bank risk management consciousness, always adhere to the safety, liquidity and profitability of commercial Banks operating principles of organic unity.
Table of Content
Chapter 1 Introduction 8
1.1 Research Background and Purpose 8
1.1.1 Research Background 8
1.1.2 Research Purpose 10
1.2 Research Goal and Content 10
1.3.1 Research Goal 10
1.3.2 Research Content 11
1.4 Research Approach and Methodology 13
1.4.1 Research Approach 13
1.4.2 Research Methodology 14
Chapter 2 Literature Review 14
2.1 Literature review from different scholars for the relationship between exchange rate and stock price 15
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