Yuan Drops Friday as China Sends Speculators a Message

China let its currency fall sharply again Friday, sending another clear message to speculators that the yuan is not a one-way bet.
It was the ninth consecutive decline for a currency that is tightly controlled by the central bank and has rarely deviated from a steady appreciation.

For years, investors have viewed the continued strengthening of the Chinese currency as a very safe bet. Indeed, it’s gained about 10% since the middle of 2010.
But markets have been shocked this week by the sudden change in direction — the yuan has fallen 1.6% against the dollar over the past nine days.
The 0.4% drop on Friday was particular steep. One dollar now buys 6.15 yuan, up from a low of 6.04 in late January.
That may seem like a small move, but it’s significant for a currency that is only allowed to trade within a narrow range.
Analysts say the People’s Bank of China is behind the the reversal.

via CNN

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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