The Yuan is weakening again in trade this afternoon with the price of the USDCNY on Reuters currently sitting at 6.4412. That’s 0.11 above the reference rate set this morning of 6.33 and an additional fall of 1.74% for the yuan against the US dollar.
That move, coming on top of yesterday’s 1.85% devaluation and today’s 1.6% depreciation has triggered speculation that this new regime instituted by the PBOC is a covert way to let the market set the Yuan rate and thus drive it lower against the US dollar.
David Scutt has run the numbers and says that “today’s move puts the yuan on track for its weakest close against the US dollar since July 22, 2011.” Here’s the chart:
This is a positive positive for China’s economy and exports, but the move today is while currently inside the PBOC’s 2% daily limit the magnitude of this afternoon’s move has clearly raised some eyebrows at the Chinese central bank.
Reuters is reporting that forex dealers are “saying that Chinese state-owned banks are selling dollars on behalf of the central bank to keep Yuan around 6.43”.
That might sound like a strange thing for a newswire to know. But we have seen many times over the past three decades of largely freely floating currencies that telegraphing your moves to the market, via the dealers, an important part of central banks’ strategic playbooks.
China appears happy to let the Yuan weaken. Just not too fast.
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