The Bank is accepting a falling yuan, but not at the pace the market is pricing. Another huge discrepancy between the modelled expectation and the PBOC decision. I’m not sure about the yuan as a candidate for reserve currency status if its so subject to the whims of an organ of the Chinese Communist Party.
People’s Bank of China set the onshore yuan (CNY) reference rate for the trading session ahead.
- USD/CNY is the onshore yuan. Its permitted to trade plus or minus 2% from this daily reference rate.
- CNH is the offshore yuan. USD /CNH has no restrictions on its trading range.
- A significantly stronger or weaker rate than expected is typically considered a signal from the PBOC.
The previous close was 7.2990
PBOC injects 168bn yuan in open market operations (OMOs) via 7-day reverse repos (RRs) at an unchanged rate of 1.9%
- 5bn yuan of RRs mature today
- thus a net 163bn yuan injection on the day in OMOs
This article was written by Eamonn Sheridan at www.forexlive.com. Source