China’s renminbi climbs to 15-month high, overcoming weak PBOC fixing

[SHANGHAI] China’s renminbi climbed to a 15-month high against a weakening US dollar on Tuesday (Dec 23), even as the central bank signalled rising unease over the currency’s recent rally via its official guidance fix.

The onshore yuan ended the domestic trading session at 7.0287 per US dollar, the strongest such close since Sep 30, 2024.

Its offshore counterpart fetched 7.0181 around 4.30 pm Singapore time.

The renminbi has gained more than 3.8 per cent so far this year and looked set to book the biggest annual rise since 2020, supported by broad US dollar weakness, easing trade tensions with the US and resilient Chinese exports.

Global investment houses expect the renminbi’s upward momentum to extend into the new year and test the psychologically important seven-per-US dollar mark, less than half a per cent from the current level. Most forecast only a modest appreciation.

“I think China will allow the renminbi to appreciate at a measured pace, but it won’t allow big shifts to avoid one-way bets and casting instability,” said Kelvin Lam, senior economist at Pantheon Macroeconomics.

“Instability in the face of a weakening of the Chinese economy is the last thing you want,” Lam added, predicting that the renminbi will finish 2026 at 6.95.

Prior to market open, the People’s Bank of China set its renminbi midpoint rate at 7.0523 per US dollar, the strongest since Sep 30, 2024, though weaker than a Reuters estimate of 7.0267.

The gap between the official midpoint and Reuters’ market-based estimate represented the largest weak-side deviation, since the data became available in 2022.

Currency traders interpreted the softer-than-expected guidance as an attempt to rein in a renminbi rally.

Strength in the currency was also underpinned by heavier seasonal demand, traders said, as exporters usually convert more of the foreign exchange receipts into the local currency to meet various payments, including administrative requirements and for employees, towards the year-end.

Major state-owned banks were seen buying US dollars and selling yuan in the onshore spot market to slow renminbi gains, people with knowledge of the matter said.

China’s trade surplus topped US$1 trillion for the first time in the first 11 months of this year.

However, other indicators point to the world’s second-largest economy stalling in November, with factory output and retail sales growth slowing as a lingering property crisis weighs on consumer and business sentiment. REUTERS