PBOC to Keep Yuan Volatility Under Control

Keeping China’s yuan from falling much further will likely bedevil the mainland’s policymakers, Eric Robertsen, head of global macro strategy and foreign-exchange research at Standard Chartered, said on Monday.

The yuan has certainly been volatile recently.

The People’s Bank of China (PBOC) set the yuan midpoint at 6.9262 on Monday, a sharp drop for the renminbi, compared with Friday’s fixing at 6.8668. On Tuesday, the fixing was set at 6.9234, indicating a slightly stronger yuan, compared with the pair’s onshore trading close at 6.9330 on Monday.

China’s central bank does not allow the currency to move more than 2 percent from its daily fixing in onshore trade. While policymakers cannot closely control offshore trade of the currency, it usually remains relatively close to its onshore counterpart.

Onshore, the dollar was fetching as little as 6.8679 yuan late last week, dropping from levels as high as 6.9603 yuan earlier in the week. At 9:35 a.m. HK/SIN on Tuesday, the dollar/yuan was at 6.9285.

In offshore trade late last week, the dollar was fetching as little as 6.7815 yuan amid a spike in overnight borrowing and deposit rates, down from as much as 6.9872 early last week. At 9:20 a.m. HK/SIN on Tuesday, the dollar was fetching 6.8879 yuan offshore.

via CNBC

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.

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