The People’s Bank of China appears to be pushing back against market expectations for the yuan to strengthen beyond the 7.00 psychological level, signalling that authorities are now more comfortable with stability than further appreciation. After weeks of guiding the currency stronger, the PBOC abruptly shifted tone:
- Thursday’s USD/CNY fixing widened to a +150-pip adjustment (from +80 pips), slowing the yuan’s climb as it hovered near a 14-month low in USD/CNY terms
- On Friday the central bank almost fully removed the strengthening bias amid a rebound in the U.S. dollar, setting the fix close to market estimates.
- The move suggests the PBOC views current levels as broadly acceptable and may keep the yuan tightly managed in the near term to preserve investor sentiment and avoid undue volatility.
The focus on currency stability comes ahead of the Central Economic Work Conference and a Politburo meeting later this month, key events for signalling the 2025 policy stance. Slowing Q3 growth and President Xi Jinping’s pledge to boost domestic demand in the next five-year plan add to the case for avoiding FX turbulence.
This article was written by Eamonn Sheridan at investinglive.com.