Currency News: Renminbi rally after China relaxes control
Currency News
Currency news. The renminbi experienced its worst day in three months after Central bank of China cancelled two rules intended to support CNY in a sign that official nervousness about currency reduction and capital flight has eased.
The renminbi has gained 6.9% this year, reversing all of last year’s record loss of 6.5%. It can be its best year.
The rise has come during a concerted effort by Beijing to slow down the capital flight, which was driving down the value of the Chinese currency.
In a sign of the campaign’s effectiveness, China’s foreign exchange reserves have risen for seven straight months since hitting a three-year low in January.
The People’s Bank of China (PBOC) has cancelled reserve requirements for financial institutions settling foreign exchange forward yuan positions, it said in comments emailed to Reuters on Monday morning. The PBOC has also stopped requiring foreign banks to put aside reserves for offshore yuan deposits in China. Both changes are effective immediately.
These were the first concrete signs Beijing was prepared to relax its efforts to shore up the currency, and the onshore renminbi rate fell 0.5% against the dollar to 6.523 — its biggest one-day drop since June. On Friday, the renminbi reached 6.4349, its highest since December 2015.
It seems that Chinese policymakers are worrying about the strength of the yuan as exporters come under pressure, risking to hit the financial system ahead of an important Communist Party gathering soon.
A lot of analytics think that CNY growth will continue, but slower from now on.
