Battle lines are being drawn in Beijing — in a way no one expected this year. On one side are traders ready to bet there is not much the central bank can do to limit the renminbi’s remarkable rally; on the other is the People’s Bank of China, whose heavy hand and ability to control the market are well known.
On Friday the renminbi raced to a new high against the US dollar. On Monday central bank actions halted the rally in its tracks. But for how long?
The renminbi has gained nearly 7 per cent this year compared with a fall of 6.5 per cent in 2016, wrongfooting analysts who had uniformly bet it would weaken steadily in 2017. Last week the onshore rate touched a 21-month high of Rmb6.4349 against the dollar. And it is the onshore market — the one most tightly controlled by the PBoC — that is driving the rally, in sharp contrast to the past two years when the offshore market has tended to lead its mainland cousin.