A report by the Wall Street Journal claims that China has unofficially re-pegged its official currency to the US greenback following the election of President Trump.
According to the WSJ report the implied volatility of the Renminbi against the US dollar is at its lowest level in nearly two years, with an unofficial peg to the greenback helping to maintain currency stability amidst a time of uncertainty and transition for the Chinese economy.
Robin Brooks, chief economist at the Institute of International Finance and erstwhile currency strategist, said to WSJ that China’s management of its currency underwent a significant change following President Trump’s election, with Beijing essentially re-anchoring the RMB to the dollar.
The increased stability of the Chinese yuan in tandem with heavier capital account restrictions and higher interest rates have assuaged the concerns of investors and helped to keep money within China.
This is not the first time that external observers have discerned an unofficial re-pegging of the Renminbi by China in the midst of economic uncertainty.
While China lifted the Renminbi’s official peg to the US dollar in July 2005 following intense pressure from Washington, the anchor was unofficially revived in July 2008 just as the Great Financial Crisis was intensifying.
In August 2015 Joseph Adinolfi of Market Watch reported that China had again re-pegged the RMB to the dollar amidst the turmoil caused by the country’s stock market collapse.