The Reminbi's daily midpoint fixing is rebounding over the past two weeks after the post-Brexit slide.
The People's Bank of China set the Renminbi's midpoint rate at 6.6615 per dollar on Monday, down by 209 basis points from Friday.
After the Brexit referendum, the Renminbi's midpoint rate saw a continued slide from 6.63 in late June to 6.69 in the middle of July, only to rebound in the last two weeks. It actually hit 6.6195 last Wednesday. Experts say the recent volatility is the result of turbulence in the U.S. market.
"The U.S. GDP data in the second quarter was below expectations which resulted a dramatic slump of the dollar. But then the dollar again saw an increase recently given the surprising non-farm payroll data. The fluctuation of the dollar affects the RMB price, so the Renminbi midpoint saw an increase at first and then a decline," said Wan Zhao, senior analyst, China Merchants Bank.
The United States saw passive GDP growth in the second quarter of this year -- 1.2%, 1.3 percentage points lower than the market had expected. But the U.S. non-farm payrolls saw a surprising increase in July -- 255,000, far more than expectations.
The fluctuations in the U.S. market are what has been shaking the RMB, but Wan says the fluctuations will not last long given that the value of the dollar is unlikely to increase further, especially given the fact that China will play host to the G20 summit in September.
"The rebound will not be a trend but rather a fluctuation within a large range. So we think the Renminbi midpoint price in the next two months will be between 6.60 and 6.70," Wan Zhao said.
"We don't think the ratio will be any higher than 6.70 prior to the G20 Summit. The U.S. dollar won't see a substantial rally in such a short time and also the People's Bank of China will seek to stabilize the market as the G20 Summit is approaching.
The G20 Summit is to be held in Hangzhou in just under a month. Moreover, last month's US Federal Reserve meeting minutes predicted no change in basic monetary policies by Washington. The combination of the two factors is likely to keep the Renminbi-US dollar exchange rate just where it is, for the near future.
