China’s Currency Didn’t Really Drop, Despite Jitters Over Trump
HONG KONG — Donald J. Trump has irritated China even before taking office as president, with criticism of the country’s trade and currency practices and an unprecedented phone call with the president of Taiwan.
For a few hours on Tuesday, it looked to some as if China had struck back.
Data services widely available to the public showed that the country’s currency, the renminbi, had been sharply devalued as China slept.
Such a move would roil global markets and drastically escalate economic tensions between Beijing and the incoming administration. And because China tightly controls the value of its currency, such a sharp and sudden move would be no accident.
But no deliberate devaluation took place. Instead, the culprit was a technical problem.
Concerns are already high that slowing economic growth and persistent capital outflows are putting pressure on Beijing to let its currency weaken.
The renminbi mainly trades onshore in China during normal business hours — and it does not trade overnight, when the supposedly big devaluation took place.
A basic Google search — and data published by XE.com, one of the world’s most popular currency websites — appeared to show early Tuesday that the renminbi had suddenly fallen more than 8 percent.
The data quickly drew attention from the news media. At a published value of around 7.48 per dollar, China’s currency looked to have retreated in a flash to its weakest level since 2007.
Both Google Finance and XE appear to have used erroneous data. It was unclear what pricing sources were in play, but on Monday, ICAP, a foreign currency broker based in London, published errant quotes for renminbi-to-dollar exchange rates.
Detailed price data carried by Bloomberg and Reuters showed ICAP on Tuesday morning as quoting the renminbi at higher than 7.4 per dollar. The actual market rate at the time was about 6.86 per dollar.
What the Renminbi Chart Should Look Like
A sudden drop in the Chinese currency’s value seems to have been caused by a technical issue, not manipulation.
“Not a tradable price,” said Stephen Innes, a senior currency trader at Oanda in Singapore, said of the conspicuously weak renminbi rate. “It looks like little more than an error.”
ICAP, Google and XE did not immediately respond to requests for comment. XE updated its data after several hours to remove the anomalous quotes, but by late afternoon in Asia, Google had, too.
The related rates for offshore renminbi, which trades around the clock, were unfazed on Tuesday.
Errant price quotes are not unheard-of in financial markets. A snag last month caused Google and XE to sharply overvalue the Bahraini dinar to the dollar, prompting corrections and an apology from XE.
Slowing economic growth is adding to expectations that the renminbi will weaken, prompting Beijing to clamp down on persistent capital outflows.
And Mr. Trump’s frequent criticisms of China’s currency policies — despite being outdated or sometimes incorrect — have heightened concerns about the value of the renminbi.
Over the weekend, Mr. Trump departed from American policy by taking a phone call from Taiwan’s president, a measure that could signal he intends to broadly redefine his nation’s relationship with China.
Mr. Trump took to Twitter on Sunday to reiterate his criticism of Beijing’s currency policy, saying: “Did China ask us if it was OK to devalue their currency?”
Hours later, the seemingly sudden drop in the renminbi appeared to some like a direct retaliation.
“What is interesting is how plausible the world found this scenario, like just waiting for the shoe to drop,” said Christopher Balding, an associate professor of finance at the Peking University HSBC School of Business in Shenzhen, China.
Mr. Balding cited the downward pressures that have been building on the Chinese currency in the face of outflows, as citizens and companies rush to get their renminbi offshore and convert it into more international currencies, like the dollar.
“Trump just exacerbates all these things, raising the nervousness of an already jittery situation,” he said.
P.C: http://www.nytimes.com/2016/12/06/world/asia/china-currency-glitch-exchange-rate.html?_r=0
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