Yuan and the line in the sand at 7 (USD/CNY)
Quick thoughts via Capital Economics on the Chinese currency
- Say the devaluations we've been seeing is not a policy choice that will extend
- PBOC allowing to slide but will want to limit that
- point to the greater cost of short-term borrowing in the offshore market as indicative officials may be working to make shorting more difficult and hence contain the weakness
- "We doubt that the 7 CNY per USD line in the sand will be breached while there is still hope of talks continuing"
But … if the trade talks do break down, the PBOC may back off and allow it fall further