Why the stronger yuan might prompt a PBOC rate cut

A piece via Reuters in brief:

  • China does not appear ready cut rates, given unexpectedly strong Q1 growth data
  • China appears reluctant to cut rates ahead of the Fed
  • Yuan has been rising steadily since mid-March, its trade-weighted index has hit its highest since October 2022, its just not rising against a very strong USD

Reuters concludes:

  • If Beijing can accept the US dollar strength it could ease monetary policy to prioritise
    economic support.
  • The yuan might even emerge stronger on the ensuing
    rally in Chinese risk assets.

CNY CFETS index (Reuters chart):

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