Markets

China gets clever in bid to weaken the yuan

China trying to reframe the weak-yuan debate

If you just look at USD/CNY then the yuan looks like it's down 5% this year. It also stirs up US politicians who find China's currency policy an easy target to score points.

When China weakened the yuan in August they screwed up badly. The message came across like a panic move in a currency war and it sent markets spiralling. They were eventually forced to intervene to prop up domestic stocks.

The thing is, the yuan isn't really that weak.

Against a basket of currencies the yuan has been strong and that's eroded China's competitiveness against other emerging (and developed) markets.

China today announced it would value the yuan against a basket of currencies instead. It's a public relations exercise but it's intended to show that the yuan isn't so weak after all.

The thing is, they really should have done that a year or two ago. They're so late the USD-strength game that you start to wonder if they're picking the US dollar top.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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