With rising US bond yields putting EM currencies under pressure, the renminbi stands out as a beacon of stability. It has only edged down against the dollar and has continued strengthening in trade-weighted terms. This resilience – with capital flows also remaining stable – underlines how successfully policymakers have quashed the depreciation expectations that were well-entrenched in the market not too long ago. It also underlines that the People’s Bank has more room for manoeuvre than many suppose as yields rise overseas. Indeed, China is the only major EM in which bond yields have fallen in recent weeks. There is no sign in the official data of intervention to support the renminbi, but it serves Beijing’s interests to be perceived as a source of stability at a time of trade tensions and market uncertainty.
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