The PBoC’s not so invisible hand

The dollar weakened against the yen a day after the Bank of Japan said it would cut back on its purchasing of bonds as part of its huge stimulus programme.

While not a massive reduction, the move indicates a trend to normalisation that brings Japan into line with others around the world. The greenback has struggled in recent months on expectations central banks are beginning to tighten monetary policy, closing the gap with the Federal Reserve.

The greenback held onto gains against the Chinese yuan after the central People’s Bank of China made a technical tweak to its exchange mechanism that reduces some of its control over the unit.

The dollar bought 6.5278 yuan, compared with a low of 6.4975 on Tuesday, though it is still well down from the levels near 7.0 yuan seen around the beginning of last year.

The move raised fears the PBoC would depreciate the currency as it did in 2015, spurring a global market panic, though analysts pointed out the move was more technical.

“This policy shift is far from a repeat of the iron-fisted PBoC moves from yesteryear. But it does appear the central bank’s not- so-invisible hand was at work curbing the rapid appreciation of the yuan,” said Stephen Innes, head of Asia-pacific trading at OANDA.

AFP News

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes