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Holding Pattern

The PBOC appears to be taking a respite from introducing additional volatility into the movement of the RMB, following an effort to scare speculators by raising borrowing costs offshore. This period of stability is unlikely to persist, however, as neither offshore borrowing rates nor intervention into the foreign exchange market can be sustained indefinitely at current levels. The period following Chinese New Year in mid-February could see yet another adjustment of the central bank’s strategy to attempt to manage capital outflows and depreciation pressure on the currency.

Posted August 1, 2017
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