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That was close. For two brief periods in the late US and early Asian trading day, the offshore renminbi traded at a weaker rate than its onshore counterpart against the dollar in what would have been a reversion to type – as well as a signal that weakening was back on the agenda.
Since the turmoil that followed China’s August 2015 surprise devaluation, the offshore rate has almost always been weaker than its onshore cousin, sending a signal that international markets expect the currency to weaken and encouraging mainland investors to move money offshore.
That trend was reversed early this year when an unexpected surge in the renminbi left the offshore rate stronger – a position which it had maintained for six weeks in its longest such run in three years.
The switch in the rates’ positions was helped by the fact the onshore renminbi stops trading at 11.30pm in Beijing – or 10.30am in New York. It closed at Rmb6.8518 to the dollar while the offshore rate, which trades around the clock, eased to Rmb6.8553 in its absence.
As trading picked up in Beijing and Hong Kong on Friday, the two returned to their usual pattern with the offshore rate at Rmb6.8505 and the onshore rate at Rmb6.8615.
The surprise overnight move came as China is trying to control the rate of the renminbi’s decline, by stemming currency-weakening capital outflows while also facing angry rhetoric from the Trump White House over its trade advantages, including threats to force Beijing to the table over currency manipulation.