FOREX REVIEW: a stable week

China’s renminbi has ended the week little changed against the dollar despite climbing during the week to around its strongest levels since early 2023, underscoring Beijing’s effort to prevent appreciation from becoming too rapid. USD/CNY closed Friday at about 6.726, compared with 6.721 on August 21, meaning the RMB weakened by roughly 0.1% week on week. The broader backdrop has remained supportive for the Chinese currency, but authorities have appeared increasingly concerned that further gains could hurt exporters at a time when domestic demand remains weak. Reuters reported during the week that the RMB had approached its strongest level since early 2023 while the PBOC was seeking to slow its rise.

The PBOC’s fixings have reinforced that message. The central bank set USD/CNY at 6.7841 on August 24, 6.7852 on August 25, 6.7829 on August 26, 6.7840 on August 27 and 6.7811 on August 28. The pattern has shown only gradual appreciation despite stronger market trading levels, suggesting policymakers prefer stability rather than allowing the RMB to rise unchecked.

Against European currencies, the RMB has performed more strongly. EUR/CNY fell to around 7.792 from 7.855 a week earlier, meaning the RMB gained about 0.8% against the euro. GBP/CNY declined to roughly 9.112 from 9.168, an RMB gain of about 0.6%. Sterling itself has suffered its first weekly decline in more than a month as investors reduced expectations for further Bank of England rate increases. By contrast, AUD/CNY rose slightly to about 4.829 from 4.819, leaving the RMB around 0.2% weaker against the Australian dollar.

The coming week will put the policy balancing act under greater scrutiny. China’s August manufacturing PMI has remained below 50, highlighting weak domestic momentum, while Washington is increasing pressure over China’s large trade surplus ahead of further US-China discussions. For Beijing, a stable rather than sharply stronger RMB would help contain financial risks without adding another headwind for exporters.