PBOC is “alarmed” by the weakness of the yen (concerned over yuan implications)

Via Saxo Bank on the yen and yuan:

  • Says the People’s Bank of China is concerned (‘alarmed’ according to Saxo analysts) by the weakness of the JPY given how competitive Japanese exports are
  • And that if the yen weakens past 152 per dollar, “we could likely see the PB0C letting the onshore yuan weaken further towards 7.25”
  • And that this runs against PBoC wishes, the Bank does not have a steady weakening bias for the yuan

Putting this in context:

  • both countries are barely out of deflation according to their own official data
  • both yen and yuan are under weakening pressure
  • yen is a champion carry currency (CHF too) and yuan is being eyed that way also (not to the same extent but there is movement that way)
  • both central banks remain under pressure for monetary stimulus

I posted at the turn into the new year of the pressures on the PBoC not to ease due to their concern about a weak yuan:

That has continued, and continues, to play out. Every day we get the PBOC CNY reference rate setting shwong the Bank propping up the currency. The battle continued yesterday:

CNH is not subject to the limitations imposed on CNY movement (that’s a simplistic explanation, but its close)

This article was written by Eamonn Sheridan at www.forexlive.com. Source