A Good Story, Badly Told

The PBOC website published a statement late Friday evening highlighting a new calculation of the yuan’s value relative to a trade-weighted basket of thirteen currencies, to be published by CFETS. While the effort is described as an attempt to reframe the public and market perceptions of the yuan’s movement, which is a reasonable objective, the PBOC has not changed its policy stance and has made no attempt to explain how actual management of the currency might change relative to such a basket. As a result, the late night announcement has rekindled market fears that China is trying to open paths toward more rapid yuan depreciation, and the pressure on the PBOC to demonstrate the policy relevance of this new basket will pick up sharply on Monday morning.

Posted August 1, 2017
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