The People’s Bank of China has set the daily reference rate for the renminbi at 6.5636 per dollar, 0.02 per cent stronger than on Thursday, after the onshore renminbi weakened 0.56 per cent in market-trading on Thursday.
This breaks an eight-day trend of setting the fix higher – that is, weaker – which contributed to pushing markets down around the globe on concerns that the Chinese economy is slowing.
CNH, the offshore-traded renminbi, was 0.1 per cent stronger on the day, just before the fix. After the rate was set, it strengthened as much as 0.45 per cent, to 6.6525 per dollar.
There continues to be lots of confusion over how the PBoC sets the fix each day. The central bank claims to look at the previous day’s trading and take quotes from 10 to 20 financial institutions, and then set it accordingly. But none of this is transparent and the result has been confusing.
The fact that the onshore rate weakened 0.56 per cent on Thursday, and that the PBoC actually strengthened the fix today, is likely to cause fuel complaints that the central bank is acting in the dark. But, another weaker fix could have renewed panic in the equity market.
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