PBoC: No Red Line, Yuan Will Adjust According to Market

Two former PBoC officials have been erasing the red line at USDCNY 7.00 for a little more than a week and now the current PBoC chief confirms there is no line.

Reuters: Some yuan flexibility good, China central bank boss tells Bloomberg
Asked if there was a red line for the yuan, which has shed more than 3 percent against the dollar since mid-April and was flirting with the 7-per-dollar level, Yi said no “numerical number” was more important than another.

“The trade war would have a temporary depreciation pressure on renminbi, but you see, after the noise, renminbi will continue to be very stable and relatively strong compared to emerging market currencies, even compared to convertible currencies,” Yi said, using the yuan’s official name.

“I’m very confident renminbi will continue to be stable at a more or less equilibrium level.”

On monetary policy, the People’s Bank of China governor said there was “tremendous” room to make adjustments if the China-U.S. trade war worsens.

“We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” Yi said.
When you do not have enough reserves to defend a line in the sand, you don't draw a line in the sand.

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