Yuan Traders Eye PBOC Fixing for Insights on FX Support Levels
Traders are closely monitoring the PBOC’s fixing to assess its stance on yuan support amid economic concerns
Yuan, PBOC, China, Dollar, Economy
Beijing: The yuan has been slipping past a level that China was trying to defend all December. Now, everyone’s looking at the daily reference rate to see how much support the government is willing to give.
Traders are on edge, waiting to see if the People’s Bank of China will set the fixing weaker than 7.2 per dollar. That’s a big deal because it’s the range the yuan can trade in. Just last Friday, the yuan broke through 7.3 per dollar for the first time in a while, and folks are worried about China’s economy and how it compares to the US.
Beijing usually uses this fixing to steer expectations about the yuan. It’s been holding strong above 7.2 since the US elections, but if it lets the yuan drop, it might signal that they’re okay with it weakening further. On the flip side, if they keep it steady, it shows they’re serious about maintaining currency stability.
Interestingly, while the yuan is losing ground against the dollar, it’s actually doing better against other currencies. This could hurt China’s exporters, though, since a strong yuan makes their goods more expensive abroad.
As of Friday, the yuan was just over 7.32 per dollar. Bob Savage from BNY in New York said, “All eyes are on PBOC Monday and the fixing for the Chinese yuan.” He added that the market risk could push the dollar to 7.45 or even higher against the yuan.
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