The Chinese Renminbi (CNY) is the worst performing Asian currency this year, down 5.67% versus the USD (Fig. 1a & 1b). This marks the third year of declines with the red-back hitting an 8 year low. The pace of depreciation has actually increased in recent months with the currency lower by 1.94% in November this year as investors accelerate capital outflows to take advantage of better offshore opportunities whilst avoiding low onshore rates and further depreciation. In response, the government has introduced new capital controls and strengthened enforcement of existing ones. The combination of a weaker currency and new controls is creating significant challenges for Renminbi cash investors.
Impact of current devaluation
But on a positive note…