China seen complying with US trade war deal by allowing market forces to dictate Yuan – SCMP

 The South China Moring Post (SCMP) carried an editorial opinion piece on Thursday, drawing attention to the fact that the People’s Bank of China (PBOC) has refrained from intervention in the forex market so far this year and let market forces determine the yuan’s exchange rate ahead of next week’s US-China phase one trade deal signing that could likely include a clause prohibiting currency manipulation.

Key Points:

“The yuan started the year with a 0.26 per cent gain against the US dollar, becoming the second-best performer among Asia’s 11 most traded currencies, according to Bloomberg data.

The strength of the yuan so far this year is likely to be welcomed by Washington, although Beijing will not want it to appreciate so much that it would hurt its exporters, especially since US tariffs remain on US$360 billion of Chinese imports.

The People’s Bank of China (PBOC) has repeatedly pledged to keep the yuan “basically stable” at a reasonable and equilibrium level.

Yuan demand is also strong because Chinese exporters are converting their US dollar receipts into the local currency ahead of the Lunar New Year so they can pay for additional expenses and bonus payments to workers ahead of the week-long public holiday that begins on January 24.”