In the past, the US$ has been a relatively good guide for movements in the EMI against the Chinese currency, the renminbi, largely because the renminbi is partially pegged to the US$. However, recent currency movements suggest that we may have to rethink that. Since the start of 2017, the renminbi has appreciated by 4.9% to 6.59 yuan/US$ (units of the renminbi are known as yuan). This is less than the 7.3% appreciation seen for the $A against the US$ since January. At the same time, the Euro has lifted by 13.1% against the US$ this year. As a result of this appreciation of the renminbi, the EMI in renminbi terms has increased by 7.7% this year, compared with a 12.8% increase in the EMI in US$ terms and the 6% increase for the EMI in A$. In other words, the appreciation of the reniminbi against the US$ this year has moderated the lift in the cost of wool from Australia for the Chinese mills compared with what might have happened had the renminbi remained stable against the US$. As an aside, the European mills have been helped even more by the appreciation of the Euro against the US$ (and against the A$) – the EMI is a mere 0.7% higher in Euro than at the start of 2017.

Further details including charts showing the trends in the Renminbi against the US$ and the A$ are provided in this week's edition of the NCWSBA's Weekly Newsletter, available to NCWSBA members.