Is China Weaponizing the Yuan? Model Shows Market Rules

(Bloomberg) -- Even after the People’s Bank of China introduced the fixing mechanism in August 2015 to increase the influence of the market, there were periods when the fixing did not fully reflect market signals -- in particular, an opaque “counter-cyclical” factor was added to the regime in May 2017. Early this year though, the PBOC removed this factor, and committed to setting the yuan fixing in line with market prices. The Bloomberg Economic model shows they have followed through on that commitment. In other words, the PBOC is not using the daily fixing to guide the yuan down -- it’s just taking the cue from the market.

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