FRANKFURT (MNI) – It is too early to assess how China’s decision to
ease the renminbi’s peg to the dollar will affect exchange rate
management ahead, the European Central Bank said Thursday.
“It is too early to assess how the PBC will manage the exchange
rate in practice under the new regime,” the ECB said in its Monthly
Bulletin.
“Looking at market expectations, non-deliverable forward contracts
currently price a less than 2% appreciation of the renminbi vis-a-vis
the USD in one year’s time, ” the bulletin notes.
The future course of exchange rate management might depend on
inflationary pressure in China, which has given some cause for concern
in recent months, the ECB suggested.
“An appreciating RMB may help to moderate inflationary pressures
emanating from external sources and will also give the PBC greater scope
to use monetary policy tools to fight inflation while managing a soft
landing of the economy,” the ECB said.
–Frankfurt bureau; +49-69-720142; jtreeck@marketnews.com
[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]
