Although sustained money inflow into China requires more improvements of the perception of China’s economic outlook, for the time being at least, it does appear that interest in China is coming back. However, People’s Bank of China continues to set Chinese Yuan exchange rate significantly weaker than both the onshore and the offshore Chinese Yuan market. The chart below shows the gap between PBOC’s fixing and the onshore market rate, with a massive gap opening. Chinese Yuan is now being traded in the onshore market close to the stronger limit of the trading band, as shown by the dotted lines in the chart below.
Despite the strength in the onshore spot market, the non-deliverable forwards market still show that the market is expecting depreciation of Chinese Yuan, as the following chart from Bloomberg Brief‘s Michael McDonough shows:
Source: Bloomberg Brief
This article originally appeared here: PBOC sets Chinese Yuan at significantly weaker rates than the market
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