Speculation that China will soon allow its currency to rise against the US dollar has triggered a surge of activity in the opaque but influential offshore renminbi forwards market, dealers say.

Unusually, much of the trading in recent weeks has focused on short term forwards – from one to three months – as market participants bet on the prospects of an imminent revaluation.

“There has been a huge amount of selling interest at the front end of the market,” said Gerrard Katz, head of currency trading at Standard Chartered in Hong Kong. At StanChart, renminbi/dollar trading volumes have doubled over the past six months, Mr Katz said. Hedge funds, he added, were particularly active at the moment.

StanChart is one of the big dealers in non-deliverable forwards, known as NDFs, which allow market participants to hedge exposure or speculate on a move in a currency where local authorities limit such activity. There is no definitive source of data on the size of the renminbi/dollar NDF market, which operates through privately-negotiated deals, but dealers estimate that average daily volumes are between $3bn and $5bn.

Yesterday, the renminbi hit a five-week high in the NDF market in reaction to comments on the exchange rate from Zhou Xiaochuan, China's central bank governor.

The benchmark one-year dollar/renminbi NDF closed at 6.6418, compared to a spot rate of 6.8264. That implies the renminbi will appreciate by about 2.8 per cent over the coming year.

Over the past month, turnover of one to three-month NDFs has picked up as rumours of one-off revaluation circulated, said Justin Chan, head of Hong Kong trading at HSBC.