The renminbi was as much as 0.3 per cent weaker on Monday at Rmb6.5155 per dollar after China’s central bank reportedly signalled it had eased restrictions on shorting the currency.
The onshore rate was holding steady at Rmb6.506 in afternoon trade after hitting a 21-month high against the dollar on Friday. This was despite a 0.1 per cent firmer fix from the People’s Bank of China for the currency’s trading band midpoint – around which it can trade 2 per cent in either direction – at Rmb6.4997.
The offshore renminbi exchange rate, which is not bound by the PBoC band and trades primarily in Hong Kong, had eased as much as 0.6 per cent to Rmb6.5334 per dollar in early trading on Monday before paring losses to Rmb6.5184.
Standard Chartered on Monday also said it had lowered its end-2017 forecast for the onshore and offshore renminbi to Rmb6.55 and Rmb6.56, respectively, both from Rmb6.82 previously.
In the face of a continually strengthening renminbi, the People’s Bank of China had signalled it would roll back banks’ foreign exchange forward reserve requirements, according to reports over the weekend, reducing to from 20 per cent to zero the amount institutions must set aside when buying currency forwards.
Said measure would unwind restrictions implemented in late 2015 when the renminbi entered prolonged depreciation after being suddenly devalued in August that year which had effectively made it more expensive to bet against the currency’s continued depreciation against the dollar.