The renminbi slid through the psychological barrier of seven to one US dollar this year but that failed to create panic in the market. Instead there was basic equilibrium. This article takes a look at the currency’s trajectory over much of the year and seeks to explain what happened and why.

The renminbi traced an uncertain path over much of 2019，at times falling through the key level of seven to one US dollar，and at times making convincing gains.  The central parity rate against the US dollar rose a cumulative 2.0% in the first four months of the year，reaching 6.70 to the dollar at the end of February. However，the mid-rate lost 2.5% in May amid negative market sentiment，offsetting the gains of the previous months. The market rate weakened to more than 6.90 to the US unit and then lost ground again in June and July reflecting a volatile US dollar index and the restart of Sino-US trade talks after the meeting of the two countries’ presidents.

Yet，the US tactic of applying “maximum pressure” after the 12th round of trade negotiations helped weaken the renminbi again in August. The trading price and the mid-rate of the onshore renminbi against the US dollar slipped below seven to one. As of the end of the third quarter，the central parity rate was 7.0729 to the dollar and the closing market price was 7.1381. There had been a fall of 2.8% in the market rate from August 2 and a decline of 3.0% from the end of last year. As this article went to print in late November，the currency was still weaker than seven to the dollar.

Market Forces