PBOC To Widen Yuan Trading Band?

WSJ: China’s Yuan Tests Lower Limits
As Beijing makes efforts to lift the economy—on Wednesday China’s central bank said it would lower its reserve requirement ratio for banks by 0.5 percentage point, effective Thursday, which will boost liquidity--there is building speculation that it is getting ready to widen the yuan’s trading band.

The recent trading pattern signals a shift, as typically traders don’t move the currency far from where the central bank sets its daily reference rate, the point at which it allows the yuan to trade 2% above or below.

Bloomberg: Is China Preparing for Currency War?
At the same time, something else is afoot in Beijing could have even greater global impact. The central bank is cooking up measures to widen the band in which its currency trades. People’s Bank of China officials say it's about limiting volatility as capital zooms in and out of the economy. Let's call it what it really is: the first step toward yuan depreciation and currency war.

Chinese opinion takes the opposite position. They think the PBOC doesn't want to weaken too much, and therefore a widening of trading band is less likely (or may be delayed).

QQ Finance:人民币贬值压力大 短期内汇率波动区间难以扩大
Monday, the People's Daily commented that the recent decline is mainly due to the dollar being too strong, China should make full use of the trading band to suppress the downward trend yuan .
In other words, the devaluation pressure on the yuan is a result of excessive dollar strength which will eventually reverse. Weakening the yuan would leave it excessively weak one the dollar corrects.

China's history from the Asian Crisis and the 2008 crisis shows that it opts for stability during a crisis. Conditions have changed due to slower economic growth and an increase in debt, but the institutional bias for a stable currency remains. Markets will have to overwhelm the PBOC if there's to be a serious devaluation in the yuan.

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