Recent RMB Policy and Currency Co-Movements

27 Pages Posted: 14 Jun 2018

See all articles by Robert N. McCauley

Robert N. McCauley

Bank for International Settlements (BIS)

Chang Shu

Independent

Date Written: June 11, 2018

Abstract

This study investigates how variation in the determinants of the renminbi's daily fixing since the August 2015 exchange rate reform maps on to variation in the co- movement of the renminbi with regional and other emerging market currencies. We first identify three post-reform periods of RMB management: transition, basket management and countercyclical management. The co-movement with regional and Latin American currencies peaked in the basket period, when the daily fixing was most predictable and multilateral. By contrast, the decline in co-movement in the countercyclical management period between May and July 2017 leaves it premature to speak of a renminbi zone. The dependence of the co-movements on renminbi management has important implications for renminbi internationalisation.

Keywords: exchange-rate determination; renminbi (CNY) policy, renminbi zone, spillovers, renminbi internationalisation

JEL Classification: F31, F33

Suggested Citation

McCauley, Robert N. and Shu, Chang, Recent RMB Policy and Currency Co-Movements (June 11, 2018). BIS Working Paper No. 727. Available at SSRN: https://ssrn.com/abstract=3194328

Robert N. McCauley (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Chang Shu

Independent ( email )

No Address Available

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