Transactions of offshore renminbi soar in forex markets even as Trump slams China on currency

Turnover in the offshore yuan has reached unprecedented levels, spurred by US President Donald Trump’s broadsides against Chinese currency practices and the protracted trade dispute between the world’s two biggest economies.

On the FX trading platform of CBOE Global Markets, average daily volume in dollar-offshore yuan jumped to a record US$1.7 billion in July, from US$421 million a year earlier. EBS Market, NEX Group’s FX trading system, also saw a new high in offshore yuan transactions last month, exceeding the previous peak by 17 per cent.

The volumes, which represent a portion of the offshore yuan market, surged as the yuan slid for a fourth straight month. The drop raised speculation that China was deliberately weakening the currency amid its intensifying tariff impasse with America.

Last week’s announcement by the People’s Bank of China (PBOC) that banks would resume use of the counter-cyclical factor in setting the yuan’s daily reference rate may further fuel activity, in the view of Brad Bechtel at Jefferies.

The fixing adjustment works to restrain market influences, meaning it will have to compete with forces such as tense trade negotiations and slowing Chinese growth. That tug of war should increase volatility, said Bechtel.

“If anything, it creates a more tradeable market,” said Bechtel, the firm’s global head of foreign exchange. The PBOC is “pushing back against what the market’s doing, but at the same time, there are still a lot of variables.”