Yuan Can Go Up and Down Says Govt as Yuan Threatens Breakout

We've seen this movie before. When the yuan starts threatening the export economy, when the yuan becomes an ever larger pin approaching the credit bubble, the government reminds speculators that the yuan can go up and down because of market forces. In other words, the yuan is about get market forced by the central bank.

iFeng: 不要赌人民币升贬值！重磅会议罕见示警，不能用汇率升值抵消大宗商品涨价

After the RMB exchange rate becomes more market-oriented, the rise and fall of the exchange rate is the norm. Enterprises should establish a "risk-neutral" concept to avoid deviating from risk-neutral "foreign exchange speculation" behavior.

On May 27, the seventh working conference of the national foreign exchange market self-discipline mechanism was held in Beijing. Statements on exchange rates at this meeting are relatively rare, which has aroused great attention from the market. The meeting held that in the future, there will be many market and policy factors that affect the exchange rate. The RMB may appreciate or depreciate. No one can accurately predict exchange rate movements. The exchange rate cannot be used as a tool, neither can be used to depreciate to stimulate exports, nor can it be used to appreciate to offset the impact of rising commodity prices. The key is to manage expectations and resolutely crack down on all kinds of malicious manipulation of the market and malicious creation of unilateral expectations.

...The meeting concluded that the current foreign exchange market is generally balanced. In the future, there are many market and policy factors that affect the exchange rate. The RMB may appreciate or depreciate. No one can accurately predict exchange rate movements. Whether it is short-term or medium-to-long term, the uncertainty of exchange rates is inevitable, and two-way fluctuations are the norm. Governments, institutions or individuals must avoid being misled by predictions. A managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, is suitable for China's national conditions and should be adhered to for a long time. Under this exchange rate system, the exchange rate cannot be used as a tool, neither can be used to depreciate to stimulate exports, nor can it be used to appreciate to offset the impact of rising commodity prices. The key is to manage expectations and resolutely crack down on all kinds of malicious manipulation of the market and malicious creation of unilateral expectations.

It can be seen that the above statement responds to the recent market views that the RMB exchange rate will appreciate in the medium and long term, and the central bank will abandon the exchange rate target, and once again emphasize that the RMB exchange rate is based on market supply and demand.

Amazing! Do you know how central bankers create the illusion of control? With interest rates, they follow the markey up and down. With the exchange rate, China annouces that appreciation will end right when the chart tells them a reversal is due.

Good Spot for Yuan Reversal