While we ait for the reference rate setting from the PBOC

Comments on the yuan and China from SG overnight:

  • The PBoC and the Chinese authorities in general want low unemployment, a re-balanced economy, enough growth, a correction to years of real effective exchange rate gains, and clean air.
  • But what they really, really want is stability and control ... Letting USD/CNY rise didn't help their relationship with the US, and did trigger unrest in the capital account of the balance of payments, which in turn saw their FX reserve buffer decrease.
  • The softer CNY policy was quietly ditched in favour of a stable trade-weighted exchange rate, and unless they now see a sustained appreciation in trade-weighted terms, the currency's value has drifted down the pecking-order.
  • ... China's leaders want a weaker currency but it's not something they really, really want....

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Earlier from HSBC:

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