Renminbi Rising
With little sign of improved economic fundamentals, rapid currency appreciation over the past month is a potentially dangerous development for China – in part owing to the risk of an abrupt and painful reversal. Indeed, after strengthening sharply, the renminbi could turn out to be a prime target for short sellers.
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BEIJING – On October 26, the renminbi’s spot exchange rate against the US dollar reached the upper limit of its floating range for the second consecutive trading day. The rise began when the trading band for the renminbi’s dollar exchange rate was widened to ±1%, and has now reached an all-time high since 1994’s currency reform. With little sign of improved economic fundamentals, rapid currency appreciation is a potentially dangerous development for China – in part owing to the risk of an abrupt and painful reversal.