More RMB volatility seen as central bank takes a back seat

Beijing

THE renminbi (RMB) which has fallen by more than 4 per cent against the dollar since November is expected to drop further and be more volatile this year as downward pressures on the currency persist and the central bank gradually steps back amid ongoing financial reforms.

Last Thursday, in the aftermath of yet another roller-coaster week for the mainland markets, the Chinese central bank, the People's Bank of China (PBOC), cut the RMB fixing for the eighth consecutive day. As a result the yuan slid to a five-year low of 6.5956 per dollar in Shanghai.

Analysts say the drop last week is a signal the PBOC, which has actively been buying RMB on both the onshore and offshore markets for the past year, is ready to let market forces play a bigger role in the fixing of the currency, which for the moment is decided on a daily basi…