I posted way back in January on the tight spot the People's Bank of China finds itself in:

  • destabilizing CNY dynamics could tip a slow burn economic slowdown into financial meltdown that triggers a crash

That was in the context of the PBoC holding back on stimulus, but the goal of CNY stability is playing out also in this ongoing support from the currency being given by the Bank. Today's reference rate setting showed the largest gap from the model estimate ever on record (going back to 2018).

The People's Bank of China is showing no sign of letting the yuan devalue to anywhere near the market is trading it at. In the short term I think their determination winds. One, the PBoC is a black box, no-one outside of it know what goes on in there, and two, China does have the USD reserves to out up a fight (sell USD/CNY) for a good time, long enough to beat off those speculating on a weaker yuan at least. I'll caveat all this with saying the market always wins in the end, but that could take years.

Offshore yuan trade:

usdcnh pboc refernce rate 11 April 2024 2