2015-07-21

How Much Will China Pay to Stabilize Yuan?

WSJ: As Markets Swing, Beijing Steadies Yuan
“Even though they don’t have a formal peg now, this is the closest it has been to such a period of stability,” said Khoon Goh, a currency strategist at Australia and New Zealand Banking Group Ltd. in Singapore. Despite recent moves in global financial markets, “the [Chinese yuan] has remained remarkably stable.”

...China doesn't “want to see the market spooked one way or another,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong. “The equity market meltdown created a whole new reason to clamp down on [the currency] some more.”

...It is quite clear that [China] is not using the currency as a way to try and provide stimulus for the economy,” Mr. Goh said.

Rather, China is trying to avoid mistakes made by many other emerging-market countries. By opening up their capital accounts too fast, allowing funds to flow freely across their borders, they laid the groundwork for furious surges and rapid depreciations in their currencies, such as those in Thailand during the 1990s.

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