PBoC to Defend 7 CNY to the Dollar

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The market vs the central bank show is back as yuan falls against the dollar to now 6.91 CNY to USD.

The offshore yuan dropped as low as 6.94, nearing the highly crucial level of 7 which it hasn’t passed in more than a decade.

“At present, rest assured they will certainly not let it break 7,” an unnamed source told Reuters.

“Breaking 7 is beneficial to China because it can reduce some of the effects of tariff increases, but the impact on our renminbi confidence is negative and funds will flow out,” the source said.

Funds are flowing out of China to the tune of $7.56 billion of Chinese A-shares in the 20 trading sessions up to May 14.

There’s reports however that Beijing is expected to roll out more stimulus to shore up the world’s second largest economy.

Another source says China’s central bank, PBoC, might “tolerate the yuan weakening to 7 on fundamental factors but would act to prevent speculative short-selling of the currency.”

China’s current account has turned to deficit from a decade long surplus, which might make their job of defending 7 CNY a bit more difficult.

Growth in their economy has now also slowed down to 6.4% in a downwards trend for the past decade from the 12% in 2010.

Shanghai stocks have dropped another 2.5%, down about 13% since April with their exports to US now potentially becoming more expensive after Trump raised tariffs.

Bitcoin and cryptos in general might be one way of hedging CNY with Over the Counter (OTC) USDT standing at 7 CNY per dollar.

PBoC has tried to implement a banking blockade on cryptocurrencies, but they have been routed around to an extent through peer to peer trading.

That might have contributed to the recent rise of cryptocurrencies in addition to other factors.

Copyrights Trustnodes.com

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