China keeps yuan in check as PBOC resists sharp rise against weaker US dollar: analysts
The People's Bank of China is maintaining a cautious stance on the yuan, resisting market pressure for appreciation despite a weakening US dollar. Analysts suggest this indicates a shift toward currency stability rather than aggressive growth in the coming months.
Why it matters
China's currency policy significantly impacts global trade balances and international market stability during periods of US Treasury volatility.
As the US dollar weakened amid recent US Treasury market interventions, analysts noted that the Chinese yuan had strengthened by a smaller margin, highlighting Beijing’s caution over allowing a sharp appreciation in the currency.
Compared with a more than 2 per cent decline in the US dollar index since late July amid two US Treasury interventions – a joint US-Japan currency intervention to support the yen and the Treasury’s move to expand long-term bond buy-backs – the yuan has gained less than 1 per cent against the dollar, according to a note issued by Gavekal Dragonomics on Wednesday.
“The response of the People’s Bank of China (PBOC) to these unusual interventions from the US has been telling,” He Wei, a China economist at the Beijing-based research firm, said in the note.
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