They don’t say by how much, but China announced that they will let the yuan trade in more flexible fashion.
Looks like China did not want to take the load of grief that was sure to come its way at the G20 after exports increased 50% in the month of May…
The PBOC statement said:
In view of the recent economic situation and financial market developments at home and abroad, and the balance of payments situation in China, the People’s Bank of China has decided to proceed further with reform of the renminbi exchange-rate regime and to enhance the renminbi exchange-rate flexibility
The impact of the move should be muted on the major currencies. Back when EUR/USD was at 1.60, the market was using the that pair as a de facto USD/CNY substitute. That is no longer the case today.
The commodity currencies may weaken at the margin on the notion that a stronger yuan may decrease Chinese exports, but I would expect that to be a very temporary knee-jerk reaction as China will likely move in glacial fashion toward a stronger exchange rate, blunting the impact on exports, as in the past.
The announcement does head off an increasingly tense war of world between Washington and Beijing, and is a macro dollar positive to the extent that is decreases the odds of a trade war. Looks like the US will avoid a scrape with its banker…
