Renminbi Depreciates Heavily as Economic Woes Mount
(27 June 2023 – China) China’s Renminbi (RMB) has slumped to a seven month low against the US Dollar as mounting concerns over a sharp contraction in export volumes and sluggish domestic economic growth compound rising US interest rate pressure on the currency.
The RMB/USD has been under pressure since the US Federal Reserve began hiking rates in 2022, driving yields on US treasuries higher than China’s and leading to a concerted shift away from RMB-denominated debt.
The Chinese currency declined to 7.220, marking one of the worst quarterly falls on record since the country ceased a soft peg against the greenback in 2005. It is the largest slide since sweeping COVID-19 lockdowns in 2022 brought the Chinese economy to a stand-still.
“The Fed paused in June but the renminbi is still weakening, that’s very much a shift from the interest rate story. Concerns over Chinese growth has been weighing on the currency since early in the second quarter, but pressure from the Fed has been replaced by concerns over exports, which registered a surprise year-on-year fall of 7.5 percent last month” commented Bank of Singapore Chief Economist, Mansoor Mohi-uddin.
“Worries about the economic recovery internally and the external environment, those two factors are what’s driving the currency weaker.”
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