PBoC: Trying hard to stop Yuan slide – Rabobank

By FXStreet FXStreet (Delhi): Piotr Matys, Research Analyst at Rabobank, notes that the Chinese central bank has spent more than USD 90bn to stem the Yuan slide in August alone.

Key Quotes

“Throughout 2014 the Bank of Russia spent around USD 90bn intervening to slow down the pace of ruble’s depreciation against the US dollar. Official data for August published on Monday revealed that the People’s Bank of China burnt through a similar amount of hard currencies to support Chinese yuan in just one month as FX reserves fell sharply by USD 93.9bn to USD 3.56trl – the biggest monthly drop on record.”

“The fact that USD/CNY is trading well below the year-to-date high at 6.4489 set on August 12 (after the PBoC devaluated the yuan on August 11) reflects Chinese officials’ determination to prevent excessive CNY’s depreciation against the USD. Spending more than USD 90bn per month, however, is an unsustainable long-term strategy. Hence, we expect USD/CNY to trend higher at 6.80 in 3m and 7.20 over the 6m horizon.”
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Source:: FX Street