The PBOC are thought to have been using one of the big US banks as their selling agent in USD/CNY, selling huge amounts early today to ward off any potential panic after the China currency bill. The gaps higher earlier this morning in USD/Asia (and the gap lower in AUD/USD) have now been undone to some extent.
The PBOC also intervened very heavily on the Shanghai stock exchange, buying Chinese banking stocks in particular. The main index is now over 2% higher after being 1.25% lower just after the open.
The question is why does the PBOC feel it necessary to intervene so heavily in the stock market in particular. Are things really that bad?
