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Renminbi showdown beckons ahead of PBoC’s return
6 HOURS AGO by: Peter Wells
The Chinese currency has come back into focus as the “offshore” renminbi trades around its weakest level in six years.
With mainland markets shut since last Friday for the Golden Week holiday, the offshore renminbi, or CNH, has been pushed weaker by traders in the absence of the People’s Bank of China providing a guide via fixing the midpoint for the so-called “onshore” rate.
That could set the scene for some fireworks on Monday, when the PBoC and the rest of the mainland return from their holidays. It begs the question whether the central bank will tolerate the weakness and allow the onshore rate to slide toward its offshore counterpart, or whether it will set the fix stronger.
CNH weakened to as much as Rmb6.7182 per dollar today, which is its weakest intraday level since mid July, before recovering to Rmb6.7149. Should it close at this level, though, it would be the weakest the offshore rate has been since September 2010.
The offshore rate was introduced in July 2010 at a level of Rmb6.725.
CNH is traded outside the mainland and not subject to a trading band. Its counterpart CNY, the onshore renminbi, trades 2 per cent either side of a midpoint fixed each day by the PBoC.
On September 30, before the start of Golden Week, the PBoC fixed the renminbi midpoint at Rmb6.6718. That same day, CNH closed at Rmb6.677.
Meanwhile, data today showed China’s foreign exchange reserves fell in September to 3.166tn dollars, their lowest level since May 2011.
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