Last week’s movement of China’s currency through the 6.50 level per dollar raises the question of whether a shift in exchange rate policy is currently underway. Both the currency’s movement against a trade-weighted basket and the direction of the USDCNY fixings changed sharply last week as the yuan weakened. Trading activity this week following the PBOC’s 50 bps RRR cut, along with the USDCNY fixings, may set the tone for both market and political narratives about China’s exchange rate policy for the rest of the year.
