USD/CNY above 6.1250 as Weakness Surprises Markets

The sun will rise in the East. The New York Yankees will make the playoffs. The yuan will strengthen against the dollar.  For years, investors have viewed the steady appreciation of the Chinese currency as one of the few things in life they could count on. Indeed, it’s gained about 10% since the middle of 2010.

But markets have been shocked in recent days by a sudden change in direction — the yuan has fallen 1% against the dollar over the past six days.

One dollar now buys 6.12 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 tightly controlled and allowed to trade only within a narrow range.


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