Is the PBoC starting to guide the yuan downward outright against the dollar after two years of trying to boost its value, reflecting concern in Beijing over China’s slowing economy and risking a political fight with the US? Market perception is beginning to think that way now that the yuan has been trading at the lower end of its government mandated range this week. Up to this point investors figured that it was a one way speculative trade outright.
Today for the third consecutive day, the People’s Bank of China has guided their own currency to its weakest level of the year against the US dollar. Overall, the yuan has fallen -1.1% outright this year after rising +4.7% last year against its trade superior.
Prior to this week, Chinese officials had been making progress, widening the trade band, letting foreigners make payments more easily in yuan and even allowing investors to hold the currency. To Chinese officials its all about baby steps. Having one country’s currency replace another as the worlds single reserve currency is a philosophical discussion that seems well clear of the markets radar right now.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.