Chinese FX Regulators May Step In To Stabilize Yuan

Chna's regulators are likely to move to correct any deviation of the yuan, if there is a pro-cyclical herd effect or currency overshooting risks in the market, wrote Guan Tao, former forex official and now chief economist of BOC Securities in a blog post. Guan warns against one-way bets on the yuan, and the rebound of the recently weaker yuan could be imminent with this year’s trade surplus better than that in previous years, said Guan. Under the "five-layer protection" including a surplus in balance of payments, private secondary foreign exchange reserves, macro-prudential measures, capital control, and FX reserve intervention, China can keep the yuan basically stable at a balanced level, said Guan.