The stability of the currently weakening Chinese Yuan seems to depend on the frequency and intensity of all those currency interventions made by the People’s Bank of China. Masterforex-V Academy experts say that this is going to shrink China’s currency reserves by as much as 40 billion dollars a month. This is the results of the survey conducted by Bloomberg. With that said, the Chinese authorities are expected to take urgent and tough steps to curb the devaluation of the national currency and stabilize the financial situation in the country.
As the result of such currency interventions, the Chinese Yuan is expected to lose around 1,6% more against the U.S. Dollar to 6,5 CNY per 1 USD. However, this remains to be seen since the People’s Bank of China is planning to take urgent steps to curb the devaluation. For that purpose, it is going to spend some if the country’s currency reserves, which are the world’s biggest, by the way.
As you probably know, on August 11th, the People’s Ban of China decided to devalue the Renminbi by 1,9%, which was the biggest drop n 20 years. This triggered an increase in short-term interest rates and bond yields. The central bank also gave everyone to understand that the Renminbi exchange rate is going to be based on the close price of the past trading session. This as followed by a further move down to 6,39 as CNY lost 2,9% more against USD.
Being worried about the flight of capital that followed the stock market crash and the devaluation of the Chinese national currency, the People’s Bank of China made a major short-term financial injection estimate at 19 billion dollars. Now, the central bank has to spend dollars in order to prevent the Renminbi from going further down in value.
