Is the People’s Bank of China planning to further liberate the yuan? The central bank has cut the commitment to “keep the yuan’s exchange rate basically stable” from its latest currency communique. The rest of the message repeated the existing policy, i.e. to improve the currency’s exchange rate mechanism, and adjust its value with reference to a basket of foreign currencies.
Although the currency’s peg was loosened on June 19, the daily midpoint set by Safe has barely strayed out of the tolerance levels of the original peg; the currency need only have been 0.3 per cent weaker to meet the original, pegged criteria. Against the US claims of the yuan’s ‘true value’, the currency’s ‘strengthening’ is barely discernible.