PBOC facing RMB test, tax crackdown intensifying

The People’s Bank faces a test when it sets the renminbi fix on Monday morning. With onshore markets closed for the past week, a wedge has opened between where the renminbi last stood onshore and its current weaker position offshore. A fix on Monday that remained much stronger than the offshore rate would signal that the PBOC is still trying to stem the renminbi’s decline. By contrast, allowing the onshore renminbi to weaken might suggest that the PBOC is becoming more tolerant of currency declines as trade tensions with the US continue to escalate. The coming week will also deliver some key data on PBOC foreign exchange intervention, whether stimulus is starting to boost credit, and the health of China’s export sector. And there’s a chance that the US Treasury’s report on currency manipulators will be released at the end of the week too.