What next for the renminbi’s trajectory?
Market Questions is the FT’s guide to the week ahead
What next for the renminbi’s trajectory?
With its first week above the seven-per-dollar threshold in a decade behind it, the renminbi’s path ahead remains fraught and subject to the impact of China’s economic slowdown and an escalating trade war.
US president Donald Trump remains a wild card but investors can attempt to get their bearings on the currency’s trajectory by looking to a suite of economic indicators set for release in China next week.
Official data on lending and liquidity for July could be released at any point during the week, while on Wednesday there will be readings on retail sales, industrial output and fixed-asset investment. On Thursday figures on house price changes in major cities will arrive.
Economists’ forecasts for these figures are generally bearish. If they are proved right, more bad news would weigh on the currency’s exchange rate. Market expectations for further depreciation became clear last week as a gap widened between the less regulated offshore exchange rate and that of the onshore renminbi, which is limited to trade 2 per cent either side of a daily midpoint set by the People’s Bank of China.
Analysts have tipped the PBoC to step into the offshore market if speculation against the currency intensifies. The central bank has already flagged the sale of Rmb30bn of short-term securities in Hong Kong this week — the perfect way to sop up liquidity in the offshore renminbi market, which should help stem the currency’s fall.
That will make it harder for investors to profit off the currency’s depreciation against the dollar. And that is exactly how Beijing likes it.