Renminbi does not react to continued US FX pressure

The country is once again in the political spotlight as the US Senate prepares to vote on whether to impose strict trade sanctions in response to its foreign exchange policy. But all the signs so far indicate China has not been moved.

  • 10 Feb 2011
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Beijing appeared unconcerned over the intention of US politicians in the Senate to pass a bill designed to penalise China on its foreign exchange (FX) policy. The country’s renminbi spot rate, which is fixed by the People’s Bank of China (PBoC) on a daily basis, continued to trade steadily.

Sander Levin, a senior US democrat and senator, said Wednesday he would re-introduce a bill that passed in the US House of Representatives last year that would allow the country to impose trading sanctions if China is seen manipulating its currency.

The daily fixing today (February 10) of the renminbi was US$1/Rmb6.5849, a record high for the Asian currency. However FX analysts acknowledge this actually implies a small depreciation against the trade weighted basket, given the losses the US dollar faced in trading yesterday.

The losses came after US Federal Reserve chairman Ben Bernanke said yesterday (January 9) that high unemployment and low inflation will require continued support from the Fed.

Levin said in a speech yesterday he would introduce the bill, with up to 19 Republican co-sponsors. Both the senator and several colleagues promised to take action after the US Treasury Department continued not to label China a currency manipulator.

“China may have chosen to demonstrate that it will not act under US pressure,” said Dariusz Kowalczyk, senior economist and strategist at Crédit Agricole CIB.

He added that while all signs point towards China strengthening the renminbi this year this is not down to continued US politician protests and it will not reach the levels they would prefer. The renminbi's ‘undervaluation’ is between 15% and 25%, Levin told reporters following a hearing on trade.

Strategists are expecting the renminbi to strengthen by approximately 5% this year to around Rmb6.30 to the US dollar as a result of much needed monetary tightening. It is presumed that strengthening the currency will be a necessary tool to tackle this problem.

The US$/Rmb non-deliverable forwards (NDF) market respondent to recent moves by China pricing with one-year NDF implying a gain of 2.4%.

“This may reflect continued signs that the PBoC is accelerating monetary tightening as the central bank sold three-month PBoC bills at a very high yield of 2.62%—36 basis points above the previous auction,” Kowalczyk said, noting that the last time the PBoC acted with similar aggression in 2007 it also allowed faster appreciation of the renminbi.

  • 10 Feb 2011

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 3,599.18 10 11.11%
2 HSBC 1,925.24 7 5.94%
3 Bank of America Merrill Lynch 1,736.50 8 5.36%
4 Itau BBA 916.67 2 2.83%
5 Bradesco BBI 900.00 2 2.78%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 2,421.53 5 33.29%
2 HSBC 937.89 2 12.90%
3 Itau BBA 916.67 2 12.60%
4 Bradesco BBI 900.00 2 12.37%
5 Morgan Stanley 800.00 1 11.00%

Bookrunners of CEEMEA International Bonds

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1 Standard Chartered Bank 295.00 1 32.24%
1 HSBC 295.00 1 32.24%
1 Credit Agricole CIB 295.00 1 32.24%
4 Mitsubishi UFJ Financial Group 30.00 1 3.28%
Subtotal 915.00 2 100.00%

EMEA M&A Revenue

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4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

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2 ING 3,184.83 25 9.45%
3 SG Corporate & Investment Banking 2,911.64 17 8.64%
4 Citi 2,741.75 18 8.13%
5 HSBC 1,822.32 18 5.41%

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Rank Lead Manager Amount $m No of issues Share %
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3 Standard Chartered Bank 242.57 3 11.46%
4 Mitsubishi UFJ Financial Group 191.19 2 9.03%
4 DBS 191.19 2 9.03%