China’s renminbi is heading for its worst weekly drop since before the pandemic as the country’s deteriorating economic outlook and rising returns on US debt undermine the draw of Chinese securities.
The renminbi was trading at about Rmb6.47 against the dollar on Friday, reflecting a drop of about 1.5 per cent this week and marking its biggest fall since August 2019.
The tumble for the Chinese currency marked the end of a roughly half-year stretch of stability and comes after the People’s Bank of China on Wednesday set the daily midpoint for the renminbi’s dollar trading band lower than markets expected.
Analysts have grown increasingly bearish on the renminbi, but markets had not reacted significantly until this week when the PBoC lowered its trading band and the yield advantage offered by Chinese bonds vanished as a result of rising US rates.
A weaker currency would help bolster Chinese exports and shore up economic…
