The PBOC maintained an 11+ big figure gap between the estimated USD/CNY reference rate and it setting:
But it has had to allow the CNY to weaken to over 7.2 to the dollar. As I note each day,
- USD/CNY is the onshore yuan. Its permitted to trade plus or minus 2% from this daily reference rate.
Given the mid rate and the +2% that would allow USD/CNY as high 7.3593 for the session today. Its traded to highs circa 7.3444, which is the weakest for the onshore yuan since December of 2007. So far there has been no sign of intervention in spot FX from the Bank. You’ll recall the many ‘state banks selling USD/CNY’ I’ve posted in recent weeks. Of course 7.3444 is still a ways from 7.3593, where the Bank would have to step in.
CNH slumped, USD /CNH has no restrictions on its trading range.
A weaker yuan is a conundrum for the PBoC and Chinese authorities more widely. Sure, it help the export sector, but it doesn’t help domestic consumption, which is super-weak in China (hence the stimulus moves, piecemeal though they are, we’ve been getting).