China uses lighter touch with yuan

November 12, 2015 1:00 PM (UTC+8)

 

After it’s August devaluation of the yuan shocked the global markets, China has decided to use a lighter touch in its currency interventions, said the Wall Street Journal.

Traders say that over the past few weeks, Beijing has been directing the value of its currency in a calmer manner by subtly buying and selling the freely traded offshore yuan.

fingers“We understand more about their reaction function and thought process,” Beng-Hong Lee, head of markets for China at Deutsche Bank told WSJ.

This jibes with what the Asia Times reported from the New York Hedge Fund Roundtable conference last month. Paul Smith, president and chief executive officer of the CFA Institute said there wouldn’t be a repeat of the August devaluation because it upset the global markets so much.

Smith said. “The Chinese have been listening to what’s being said in the back channels … if it happens again it will be done differently. It will be in a more coordinated fashion, but that won’t be anytime soon.”

It appears this new strategy falls under the coordinated fashion Smith suggests.

The shift toward the lighter touch is an attempt to smooth things over as Beijing pursues reserve-currency status for the yuan, alongside the U.S. dollar, the yen, sterling and the euro. Beijing has rapidly satisfied the goals set for the yuan by the International Monetary Fund, which is expected to make a decision on the yuan before the end of the year.

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