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MNI: PBOC Reduces Yuan Support, Wide Volatility Band Ahead

MNI discusses the yuan's outlook with FX traders and advisors.

MNI (BEIJING) - The People’s Bank of China has likely suspended the counter-cyclical factor within its daily fixing formula following the yuan’s rise to its strongest level against the U.S dollar this year, traders and advisors told MNI, noting a wider trading band was likely throughout the remainder of 2024 with USDCNY potentially breaking the 7.10 handle. 

The gap between the PBOC’s official yuan fixing and market estimates, which narrowed to 85pips on Aug 14 – its first time below 100pips since June 2023 – suggested the Bank may have temporarily ceased using the counter-cyclical factor, market participants told MNI, an indication the central bank had reduced its support for the currency.

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MNI (BEIJING) - The People’s Bank of China has likely suspended the counter-cyclical factor within its daily fixing formula following the yuan’s rise to its strongest level against the U.S dollar this year, traders and advisors told MNI, noting a wider trading band was likely throughout the remainder of 2024 with USDCNY potentially breaking the 7.10 handle. 

The gap between the PBOC’s official yuan fixing and market estimates, which narrowed to 85pips on Aug 14 – its first time below 100pips since June 2023 – suggested the Bank may have temporarily ceased using the counter-cyclical factor, market participants told MNI, an indication the central bank had reduced its support for the currency.

Keep reading...Show less