Onshore RMB Breaches 6.8 Against the Greenback

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The onshore value of the Chinese yuan has risen to a six month high against the US dollar at the outset of June.

On the morning of 1 June the RMB exchange rate broke through the key threshold of 6.8 against the US dollar, while the offshore rate approached 6.73.

According to analysts the recent spate of exchange rate increases differs markedly from the gains posted by the yuan at the start of the year, with abnormally tight liquidity for offshore RMB prompting gains in the onshore exchange rate which are being accelerated by a “herd effect.”

Policymakers have indicated that from a long-term perspective their priority is to maintain the stability of the Chinese exchange rate, and avoid the reappearance of any “unilateral” gains or depreciations in currency value.

In order to shore up the stability of the Renminbi, policy makers have recently pushed for the introduction of “counter-cyclical factors” into the valuation models of market makers that will compensate for overreactions on the part of “herd-like” investors.

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