When the renminbi began falling back in February, traders expected it to be temporary as China’s central bank fired a warning shot across the bows of naughty exporters. Many of them had been fiddling invoices to bring cash onshore and profit from a steadily rising renminbi.
But yesterday the dollar reached Rmb6.26 – its highest level since October 2012. The weaker daily fix, around which the currency is allowed to rise or fall by 2 per cent, shows that the People’s Bank of China is still nudging the rate down. The it’s-only-temporary theory was a bet that those borrowing cheaply in dollars and using fake trade receipts to change their money into the rising – and higher yielding – renminbi would soon stop if currency appreciation reversed. That might fix China’s erratic trade data and remove an unwanted source of currency appreciation.
But three-plus months on and the PBoC’s shock and awe incursion looks suspiciously long-term. The slide has been steady and economic news, especially from a wobbly property market, helps justify it. Yet worries about Chinese growth preceded the renminbi’s weakness. Perhaps Beijing is struggling for a way to stop pushing the currency lower without looking as if it no longer cares. After all, a signal that policy has shifted could cause a wave of renewed bets on renminbi strength.