Bank of China to let Market decide Price of Yuan

A week after the U.S. Treasury Secretary praised China for its currency stabilizing effort the Bank of China Governor Zhou Xiaochuan has hinted that the bank is moving towards a supply demand model. According to the Vice governor of the PBoC the domestic and offshore markets have started to expect a the Yuan to appreciate and depreciate instead of the continuing appreciation in the last two years.

The trade deficit in the first two months of the year increased due to seasonal factors. China has also hinted at making Yuan denominated loans to emerging economies to boost trade and promote the Yuan. Geithner at the time commented that he does not see that as a threat to the U.S. Dollar, but instead welcomes the move by the Bank of China as it signals the maturity of the currency as it unwinds from very tight controls closer to being priced by market forces.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza