Renminbi falls fuel talk of policy shift
By Peter Garnham
Tuesday, July 22, 2008
The Chinese renminbi fell for the third consecutive day yesterday, sparking speculation that its continued appreciation might not be a foregone conclusion.
The renminbi has risen more than 6 per cent against the dollar this year as the Chinese authorities have used the currency as a tool to dampen inflationary pressures in the country's overheating economy.
By midday in New York, the renminbi dropped 0.2 per cent to Rmb6.8290 against the dollar after the People's Bank of China fixed the currency's daily mid-point lower for a third successive day.
Gabriel Stein, of Lombard Street Research, said that, while the move could just be put down to “normal daily fluctuations”, the Chinese ministry of commerce had called for a slower pace of renminbi appreciation.
Wen Jiabao, the Chinese premier, has talked about helping China's exporters.
“It could be the beginning of a policy shift,” said Mr Stein. “It could also be an attempt to stave off speculative capital inflows by showing that renminbi appreciation is not a one-way bet.”
Elsewhere, the dollar recovered from early sharp losses after expectation-beating earnings figures from Bank of America, the second-largest US bank, eased some fears over the health of the US financial system.
But analysts said the focus would now turn to second-tier US banks – which were expected to be more vulnerable to credit-related losses – reporting this week.
Gavin Friend, of Commerzbank, said US economic releases this week – including jobless claims figures, housing data and durable goods orders – were unlikely to support the dollar, which last week fell to a record low against the euro.
The dollar fell 0.2 per cent to $1.5866 against the euro, lost 0.1 per cent to Y106.89 against the yen and eased 0.1 per cent to SFr1.0217 against the Swiss franc.
The dollar was flat against the pound at $1.9970, after comments from David Blanchflower, a member of the Bank of England's monetary policy committee.
