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Market Update: Chinese Yuan Reverses Trend in June
The offshore yuan was lower at 6.4 per USD in the middle of June, amid a general dollar strength ahead of a closely watched Federal Reserve meeting. The yuan strengthened from late March to touch a 3-year high of 6.35 per USD on May 31st, prompted by an improving outlook for Chinas economy and strong capital inflows. However, the rally reversed since late May as the PBoC moved to contain the yuan appreciation by raising the reserve ratio for financial institutions to 7% from 5%, the first move since 2007. Although the PBoC seems comfortable with the yuan around 3-year highs, it does not seem willing to let it appreciate more that. An article in the PBoC-backed Financial News quoted analysts as saying that the yuan is approaching a depreciation inflection point, and that it is likely to come under more pressure in the second half, Reuters reported. [/s2If]
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