The Yuan climbed 0.64% against the dollar this week, the most since December 2011, writes Robert Savage at Track Research.
The People’s Bank of China lowered its USD/CNY fixing by 257 pips (price interest point, where one pip equals 0.0001) in the June 6-10 time period and then raised it 55 pips on June 11.
This follows on better economic data out of Beijing and knowledge that “the US state department has confirmed that that the US- China Strategic and Economic Dialogue (SED) will be held in Beijing in early July,” write Claudio Piron and Albert Leung at Bank of America. “This is also likely weighing on the setting of the CNY fixing in order to deflect the criticism of China being a currency manipulator.”
The PBoC has a daily fix against the U.S. dollar and can use that to guide the Chinese yuan (CNY) higher or lower. The currency can trade in a 2% band on either side of the daily reference rate. Back in March, headlines were focused on the band widening. Of course if China really wants to let go of its currency, it needs to relinquish control of its exchange rate.
The yuan slid against the dollar at the start of 2014 as Chinese policymakers intervened to guide it lower. This was largely in a bid to curb speculation on yuan appreciation.
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