A languishing greenback has helped to push the offshore exchange rate for the Chinese yuan to a nine month high.
On 1 August offshore RMB appreciated 0.04% against the US dollar to 6.723, following middling performance of the greenback against onshore Chinese yuan which saw the latter rise 0.08% to 6.718.
Speaking to Caixin ANZ chief China economist Yang Yuting said that the latest rise in the offshore RMB exchange rate was not due to factors within China as much as the impact of a weakening greenback.
After a brief ascent in the wake of Trump’s election the US Dollar Index has seen an 11.6% slide since the start of the year, with the offshore RMB exchange rate posting a 3.5% from 6.97 to 6.72, falling well short of the precipitous drop on the index.
“This indicates that the RMB itself has not seen that many drivers pushing it up,” said Yang. “With the US dollar trending weaker, an appreciation in offshore RMB isn’t at all unusual.”
Yang’s opinion would appear to be vindicated by the comparatively low level of the Hong Kong Interbank Offer Rate (HIBOR), which has been around or at times under the 2% mark since mid-July, pointing to ample liquidity and an abundance of offshore RMB funds.
While pressure on the Chinese yuan has further alleviated with dampened expectations of a rate hike by the US Fed, ANZ still expects the US dollar to bound back as a result of current overselling, pushing the offshore RMB exchange to 6.85 by the end of the year.