Yuan limit down again; 12th day of losses

The yuan has fallen for most of December and this news has gripped China's financial media. The correct explanation has filtered into the media, which is that the central bank is setting the midpoint price too high each day (and the yuan has even appreciated a few days during this time). However, in the Chinese media and blogs, this is mainly described as the central bank maintaining yuan stability. The question I have not seen discussed, is whether this stability is political or economic. Continually hitting the lower limit will eventually put pressure on the central bank to move the midpoint lower, i.e. depreciate the yuan. Whether there's enough market pressure to force such a move is questionable in December 2011, but if the economy weakens in 2012, it certainly could become a factor.

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