FOREX REVIEW: RMB up on the dollar

China’s renminbi has strengthened against the US dollar over the past week, extending its recent gains and highlighting the challenge facing Beijing as it balances currency stability with support for exporters. USD/CNY ended Friday at approximately 6.6781, compared with 6.6918 a week earlier, a decline of 0.0137 yuan, or 0.20%, in the dollar’s value against the Chinese currency. The stronger RMB has increased the purchasing power of Chinese importers but has also added pressure on exporters competing in international markets. 

The renminbi’s performance against European currencies has been more pronounced. The European Central Bank’s reference rates show EUR/CNY falling from 7.5240 on October 16 to 7.4660 on October 23, a 0.77% decline, indicating a stronger RMB against the euro. The currency has also strengthened against sterling, with GBP/CNY declining from approximately 8.9180 to 8.9290 representing a slight weakening of the RMB against the pound, rather than a gain. These differences underline how movements in China’s currency reflect developments in other major economies as well as domestic conditions. 

The PBOC has nevertheless signalled caution about the pace of appreciation. On Friday, it set its daily USD/CNY fixing at 6.7180, the strongest since February 2023 but substantially weaker than the 6.6758 anticipated by a Reuters’ market estimate. The decision has suggested that policymakers remain willing to accommodate gradual RMB gains while discouraging rapid appreciation that could undermine export competitiveness. 

The currency’s advance has also come despite pressure from falling Chinese equities, suggesting that foreign exchange markets have remained comparatively resilient. Investors have turned their attention to the coming week’s Federal Reserve, European Central Bank and Bank of Japan meetings, with interest-rate signals potentially influencing the dollar and other major currencies. 

For Beijing, the immediate challenge is to preserve confidence in the RMB without allowing its appreciation to become another obstacle for exporters. The coming week’s central-bank decisions and signals from China’s fifth plenum will help determine whether the currency can maintain its recent gains while domestic economic confidence remains uneven.