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Afternoon analysis 28.12.2015

, author:

Marcin Lipka

At finishing of today's session the renminbi appeared to be the weakest to the dollar for more than 4 years. Overvalue on the oil market causes a clear pressure on the raw materials currencies. The rouble clearly lost value, and the Norwegian krona is the weakest to the Swedish for more than 20 years.

Renminbi and the PBOC

After a few days of a relative stabilisation, the Chinese currency loses value again. Its official rate to the American dollar is the lowest since the first half of 2011, and the USD/CNY pair reached the level of 6.4873. Even though this year's depreciation of the renminbi to the dollar was 5%, it is worth remembering that in mid August the movements were relatively small considering changes on the global currency market. However, they managed to cause a strong overvalue of the emerging markets currencies, and significant depreciations on the global stock markets.

Additionally, after the publication of today's announcement of the Chinese central bank (PBOC), we could observe a further overvalue of the renminbi on the Hong Kong market. China continue to maintain two rates of the renminbi – the official, which trading hours occur between 2.30 and 9.30 of the Polish time, and the unofficial. The latter is quoted without a 2% daily limit and quoted for 24 hours per day in Hong Kong (CNH). After the PBOC information it increased from the area of 6.55 to 6.56, and is getting closer to the peaks reached in mid August this year.

The today's PBOC statements regarding “further liberalisation of the renminbi rate”, and last week's announcement after the Central Economic Conference which suggested “elastic” and “proper monetary conditions for the structural reform”, may be an announcement of a will to continue a slow devaluation of the renminbi, especially to the dollar. It is also worth remembering that recently the PBOC suggested in its official document closer relations between the CNY and the group of currencies, and not only the dollar as it was previously.

In general, actions of the Chinese authorities seem to be adequate to the current situation. However, the market's reaction will depend on the general sentiment. If the renminbi's devaluation/depreciation accelerates because of aversion towards risk, it may also translate to the quotations of the main currency pairs, and possible growths on the EUR/USD.

Raw materials currencies are again under pressure

Besides the incident of the USD/RUB reaching the area of 80 in mid December last year, the current quotations of the Russian rouble (72 per dollar) are the lowest in history. The direct reason for overvalue of the currencies from countries which are dependant on export of raw materials, are the statements from the Iranian minister for oil, and a decrease of this resource on today's session by 3%.

According to the Bloomberg agency Bijan Namdar Zanganeh said that Iran's priority is “export of oil on the level from before the sanctions”. Tehran also plans to increase export by 500k of barrels within a week from abolishing the international limitations.

Decreasing prices of oil have a negative impact also on the Norwegian krona. Today the NOK/SEK pair depreciated to its 23-year minimums on the level of 0.96. Pressure on the Norwegian krona may additionally come from anticipations for further monetary easing which was suggested by the central bank at its recent meeting.


This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

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