As China's yuan climbs rapidly to its strongest levels in six years against the currencies of the country's trading partners, a notable absence of concern\n and intervention by the authorities is unnerving investors.
Chinese Yuan banknotes are seen in this illustration taken February 10, 2020. REUTERS/Dado Ruvic/Illustration
One popular theory is that the currency has been left alone while authorities focus on resetting the rules and financing options for property, technology and a host of other sectors. The alternate is that the PBOC is waiting for the Federal Reserve to begin its policy tightening, which could reduce the flow of foreign money pushing the yuan up.topped the 100 mark on Wednesday, a level last seen when it was launched in late 2015, market participants are desperate for some clarity.
"My feeling is that the central bank is now very confident and at ease. Risk of capital outflow is low, liquidity is relatively easy to control," Xie said. The trade-weighted index has mostly stayed within a 92-98 band since 2016, while FX reserves hover just above $3 trillion. While the PBOC has kept to the sidelines, that pile of dollar deposits has grown and is just slightly below peak levels above $1 trillion hit in June.The latest evidence of that overhang of dollars was the SAFE's balance of payments report showing China made 'other' outbound investments worth a net $265.3 billion in the first six months of the year, the bulk of which was deposits and loans.
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