China Struggles to Steady Yuan’s Decline With traders going short, depreciation is speeding up By LINGLING WEI in Beijing and SAUMYA VAISHAMPAYAN in Hong Kong Nov. 24, 2016 7:05 a.m. ET China is facing an uphill battle to maintain an orderly depreciation of the yuan as investors pile up bearish bets against the currency outside the mainland. The gap between the yuan’s value against the dollar in the domestic market and in what is known as the offshore market in Hong Kong, has been widening in recent days. On Wednesday, this so-called spread reached 0.0333, its widest since the beginning of October (apart from the day after the U.S. election), although it narrowed a touch on Thursday. While the Chinese authorities strictly limit the way the yuan trades at home, it can be bought and sold more freely in Hong Kong. But its value against the dollar is usually about the same in both markets. The widening gap now is complicating the central bank’s strategy of letting some air out of the currency at a pace Beijing dictates. The two yuan markets at home and in Hong Kong often feed off each other. Moreover, a weaker yuan offshore could encourage more Chinese businesses and individuals—the mainstay of the mainland market—to seek to convert their currency into dollars, potentially adding downward pressure on the domestically traded yuan. China has tolerated a weaker yuan since early October, right after its entry into the International Monetary Fund’s elite group of reserve currencies, acknowledging that a cheaper currency is the price of using easy money to prop up the economy. The pace of depreciation has quickened since Donald Trump’s surprise U.S. presidential-election win sent the greenback soaring and emerging-market currencies tumbling. The yuan is down 6.2% against the dollar this year in onshore markets, reaching 6.9152 against the dollar on Thursday, with more than a third of the drop in the past two weeks. The People’s Bank of China is unwilling to let the currency slide too far, too fast, for fear that might lead to destabilizing capital flows out of the country. Investors in offshore markets have, though, been pounding the yuan weaker, in the apparent belief that the central bank may struggle to control the pace of its decline. read more http://www.wsj.com/articles/china-struggles-to-steady-yuans-decline-1479989103
Rock and hard place. They don't even have enough gold reserves to be a major currency. Anyway, not sure if it is a criteria. It's time for China to sell our debt back to us. At a discount, of course. The new Prez is going to play China like the Trump Casino bond holders. The Illuminati chose the new President well. "Merca", yeah.
China doesn't seem as worried as your posts imply by Trump's election. He appeared much favoured over Clinton by chinese for his isolationist stance and lack of concern about human rights and China doesn't seem overly worried about trade tensions. Besides whereas I tend to prefer a strong yuan with high chinese interest rates, a weaker yuan seems a plus for chinese still export reliant economy, and if a devaluation is understood to come through market forces its government doesn't need to even answer accusations of an artificially low exchange rate.
Possible. And, the press release could just be trying to put them in a "victim" role when the primary goal was an edge in Trade. They had this incredible bubble economy. Empty cities just waiting to be fully populated in 20 or so years. They need to keep all gears moving. My brother just moved to Shanghai, so I don't wish them ill will. Just being insular.
Japan is desperately trying to devalue the Yen to gain a competitive edge in export, so why is a weaker Yuan bad for China's export driven economy? I tend to think their Government's top priority is to resume the >7% growth so they can find employment for the masses and avoid a worker revolution. It is a gift from Trump as our Government now cannot accuse them of devaluating Yuan on purpose to increase export to resume growth.
A somewhat weaker yuan is a good thing. A much weaker yuan that causes / is a symptom of capital flight and instability is a bad thing.
A somewhat weaker any currency is a good thing. That's the problem, they can't or don't all go down together. Somebody always get stuck on top.
Good points. Let's see, from 2012 valuation peak of 6 Yuan to 1 dollar to today, 6.9 Yuan to a dollar, a depreciation of 15%. For the Japanese Yen, its valuation peaked around the same time @ 75 to 1 dollar to today of 112 to 1 dollar, a depreciation of 49%. Could the Japanese Yen be more a symptom of capital flight and instability than the Yuan? If not what are the underlying differences? Thanks.