The Chinese yuan hit a fresh multi-year high earlier today.
It didn’t last there long.
After the People’s Bank of China (PBoC) set the midpoint for the USD/CNY at 6.2822, the strongest level since August 2015, it’s been nothing but one-way traffic for the yuan, slipping by around 1% against the US dollar.
The USD/CNY currently trades at 6.3287, up 1.02% for the session.
The move in the yuan is captured nicely in the hourly chart below.
The move follows reports that China may be about to relax some capital controls introduced in early 2016.
According to Reuters, citing unnamed sources, China has resumed an outbound investment scheme for the the first time in two years, granting licences to about a dozen global money managers.
“Foreign fund managers with newly awarded quotas will be able to raise money in China for investment overseas under the Qualified Domestic Limited Partnership (QDLP) plan for the first time since late 2015,” Reuters reports.
“The quota-based Shanghai scheme was unofficially suspended when China tightened capital controls amid turmoil in its stock and currency markets [back in late 2015].”
If correct, it’s could be interpreted as a sign the Chinese government is now less concerned about the potential for large-scale capital outflows from the country.
Sean Callow, Senior Currency Strategist at Westpac, told Business Insider that other factors such as broad-based US dollar strength overnight, a smaller Chinese trade surplus in January and reports in China’s state-run Economic Daily newspaper warning that yuan is more likely to see fluctuations in 2018 may also have contributed to today’s move.
“[There’s] plenty of mystery as ever on the yuan given the role still played by the authorities, but the signs were growing in recent days that a reversal was in the works,” he said.