The appreciation has been slow but steady. After a few years of managed appreciation, the renminbi was repegged during the 2008 crisis. In response to considerable pressure from the United States, the peg was removed and the currency was re-'floated' in June 2010. However, the Chinese authorities continue to set the daily closing value and the renminbi has appreciated less than 7% against the U.S. dollar since then. Reputable estimates of the size of the undervaluation are as high as 70% (here), but my read of the 'main-stream' estimate has been about 20-30%.
This intervention has caused considerable furor in the United States. It seems like every six months (or is it a year?) there is a bout of political grandstanding surrounding whether the Treasury will be forced by the Senate to include China on their list of currency manipulators, which would pave the way for the U.S. government to impose trade sanctions. Of course, due to the symbiotic nature of the trade relationship between China and the United States, this never ends up happening, but the posturing appears to have started again (here).
The market however, sees things quite differently. The renminbi forwards market is currently pricing a depreciation of the currency against the U.S. dollar over the coming months.
In other words...
The best explanation I can come up with is that the market consensus is waking up to the Jim Chanos version of the Chinese growth story - economic expansion fueled by unsustainable credit growth which is financing enormous investment in overcapacity (here, starting at the 7 minute mark). While the renminbi forwards have moved in a manner consistent with the recent sell-off in Chinese equities and commodities, I was still quite surprised to see this pricing in the forward markets. Any divergence between these asset classes should be closely monitored moving forward.
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