USD/CHN: Renminbi Weakness A Warning To Speculators?
Matt Simpson | Feb 27, 2014 12:18AM ET
After a 7th consecutive day of renminbi weakness and a clear rejection of the January lows, economists are questioning if the country's central bank is sending a warning to currency speculators. The Central bank however denies such actions, claiming the weakening renminbi is being caused by market forces and not manipulation.
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USD/CHN: Trading at 5-month highs:
Looking at the price action, it is clear that the dynamic of the USD/CHN has changed, regardless of whether it is due to central bank intervention or 'market forces’. Typically we see weekly ranges deviating around +/- 0.2% range but only last week a high of 1.34% was in place before the pair closed the week at +0.9%. This week the weakening of the yuan continued with an intraday high testing August 2013 levels and currently up 0.42% from last week.
Despite the abnormal movements, the central bank said:
“The degree of exchange rate volatility is normal by the standards of developed and emerging markets. There is no need to over-interpret it.”
It is possible China's weaker Manufacturing PMI data and increased concerns about the property market have led to a reduced risk appetite, but these concerns are not new, so what exactly has triggered this remains to be confirmed.
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