PBoC intentionally weakens Yuan

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.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell