CNY: China's 'global renminbi' moment – ING

It's been a good month for Chinese assets. The benchmark CSI 300 is +5.9% this month in dollar terms. The People's Bank of China (PBoC) USD/CNY fixing is now the lowest since last November and suggests authorities are welcoming this modest renminbi strength even though recent macro data has been soft and the global trade environment remains uncertain, ING's FX analyst Chris Turner notes, ING's FX analyst Chris Turner notes.

USD/CNY to grind down towards 7.10 and 7.05

"There have also been two developments this week which have caught our eye and could be described as China's bid for a 'global renminbi' moment. The first is a report out of Kenya that it is in discussions to swap its USD debt into longer-dated CNY debt. Kenya has about $40bn of external debt. While there is a commercial play, no doubt politics is at work too. The dollar became the pre-eminent global reserve currency in the interwar period after the US made heavy, dollar-denominated loans to Europe. China will be keen to roll out CNY-denominated loans to grow the renminbi sphere of influence."

"The second is a Reuters report that China is looking to fast-track the creation of renminbi-backed stablecoins. Obviously, there's huge focus on USD-backed stablecoins – such as Tether – especially after the passage of the GENIUS Act in the US. While stablecoins are largely seen targeting the retail space at the moment, China is no doubt wary that the technology will spread to the wholesale space and China won't want to be left behind should wholesale payments head that way. In other words, stablecoin is another arena in which global blocs will be fighting to internationalise their currencies."

"In all, these are positive developments for the renminbi, and for the quarters ahead we have USD/CNY grinding down towards the 7.10, possibly 7.05 region."