Chinese Currency Value Declines

Global Business

Chinese currency fell to its weakest in 16 months this week, a trend that reinforced the currency is no longer a one-way bet as Beijing presses ahead with market reforms. Cathy Yang discusses the impact on foreign players wanting to do business in Hong Kong, the key offshore market for the RMB.

Chinese Currency Value Declines

Chinese Currency Value Declines

Chinese currency fell to its weakest in 16 months this week, a trend that reinforced the currency is no longer a one-way bet as Beijing presses ahead with market reforms. Cathy Yang discusses the impact on foreign players wanting to do business in Hong Kong, the key offshore market for the RMB.

The Chinese currency’s decline hasn’t let up since the start of the year, and it is fast-changing perceptions about the renminbi as a one-way bet in Hong Kong.

While it’s still business as usual at the city’s money changers, their daily fixings on the rate haven’t looked any more attractive than they did in the past year.

The RMB has already lost the three-percent gain it made in 2013.

The currency this week touched a 16-month low, despite the People’s Bank of China fixing its trading point at a higher level.

Banks though have started offering incentives to keep Hong Kong savers reason to let their RMB accounts grow. HSBC has started offering higher interest rates on RMB time deposits.

The RMB has fallen repeatedly in recent months, with many dealers believing the decline is a deliberate move by the People’s Bank of China to target speculative funds betting on continued increases. But traders have also blamed the slowing economy on the Mainland as a crucial reason.

Policymakers in Beijing have pledged to move gradually towards full convertibility of the RMB, helping bring with it the uncontrolled movement of funds in and out of the Mainland.

For now, savers and traders will have to get used to the ‘new normal’ on the RMB: the good old days of it being a one-way bet may very well be over.