Renminbi Hits New High as Yen Strength and Dollar Weakness Take Hold

China's renminbi reached a new high against the US dollar on September 3, driven by stronger central bank fixes and persistent dollar weakness. The People's Bank of China set the midpoint rate at 6.7807 per US dollar, its strongest level since February 8, 2023.

The spot renminbi rose to a high of 6.7180 per US dollar before trading at 6.7183 as of 11:28am Singapore time. Its offshore counterpart fetched 6.7177 renminbi per US dollar.

A trader at a Chinese bank attributed the strength in the renminbi to the rebound in the Japanese yen, which has been gaining ground against the US dollar. With markets pricing in a 61% chance of a Fed rate hike in September, investors will be closely watching the upcoming US non-farm payrolls data for clues on the US Federal Reserve's policy outlook.

Goldman Sachs economists anticipate China's policymakers to favour gradual renminbi appreciation against the US dollar at a rate of 3-5% per year. This approach aims to balance objectives such as fostering growth in advanced industries, building a 'manufacturing superpower', and accelerating the internationalisation of the renminbi.