Yuan trading signals lower expectations for appreciation

Trading on China’s renminbi touched the bottom of its daily limit for seven sessions in a row on Thursday, signaling that investors and firms expect China’s currency to stop appreciating, The Wall Street Journal reported. The value of China’s currency is set daily by the People’s Bank of China (PBoC), and is allowed to trade within a 0.5% range above or below the pegged rate. Investors who had been expecting an appreciation of the currency have now shifted course, betting that the value will fall by trading at the very lower bound of that range. The pegged value of the renminbi has effectively stopped appreciating against the US dollar since November 1, and the PBoC may be preventing the market from driving down the price further. A more unstable currency could have knock-on effects in the offshore renminbi market in Hong Kong, where many products and willingness to use the currency for trade settlement have been predicated on continued appreciation.