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MNI: PBOC Focuses On Currency Basket As U.S. Dollar Rallies

MNI (Singapore)
MNI (Singapore)

China’s central bank wants the currency basket to support exporters but without risking capital outflows.

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The People’s Bank of China will continue to watch the yuan against a basket of major trade partner currencies rather than exclusively focus on the U.S dollar, though a response is expected after the pair broke through 7.2 on Wednesday, analysts said.

The PBOC’s focus on a stable CFETS RMB Index, which is a trade-weighted basket of 24 currencies, attempts to strike a balance between supporting exports but without too much weakness to encourage capital outflows, said China Securities chief economist Huang Wentao. He said slower export growth could weigh on the currency as less US dollars would be deposited at banks and converted into yuan.

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The People’s Bank of China will continue to watch the yuan against a basket of major trade partner currencies rather than exclusively focus on the U.S dollar, though a response is expected after the pair broke through 7.2 on Wednesday, analysts said.

The PBOC’s focus on a stable CFETS RMB Index, which is a trade-weighted basket of 24 currencies, attempts to strike a balance between supporting exports but without too much weakness to encourage capital outflows, said China Securities chief economist Huang Wentao. He said slower export growth could weigh on the currency as less US dollars would be deposited at banks and converted into yuan.

Keep reading...Show less