Previously, China burnt through $1 trillion of foreign exchange reserves to fight against depreciation expectations following a sharp one-off devaluation in 2015. The PBOC is also believed to influence offshore markets in various ways, including scheduled and off-cycle sales of yuan-denominated bills in Hong Kong, which traders say can soak up liquidity and stem speculative short-selling of the currency. HSBC Premier requires you to have an active HSBC Premier chequing account, and maintain combined personal deposits and investments with HSBC Bank Canada and its. DOES THE PBOC INTERVENE?Ĭhina’s central bank rarely intervenes directly in foreign exchange markets, but usually operates through state-owned banks, in addition to using money market operations and its hefty foreign exchange reserves.
This week, the CFETS index fell below 92 to the lowest level on record. This currency rates table lets you compare an amount in US Dollar to all other currencies. Analysts say keeping the CFETS index rangebound will ensure China isn’t disadvantaged on exchange rates versus its trading partners.Many analysts suspect Beijing is comfortable with the CFETS index swinging between 92 and 98, which makes the currency not too weak relative to partners. So a weaker yuan against the US dollar would generally make Chinese goods exported to the US cheaper, increasing demand, while making US exports to China more expensive, reducing demand.
HOW HAS THE CFETS BASKET BEHAVED IN THE PAST FEW YEARS? In late 2015, China unveiled a new trade-weighted CFETS yuan index, saying the yuan’s value should better reflect its trade and investment with multiple countries, not just the United States.Since 2017, the number of the currencies in the basket is 24 and the dollar’s weight is 22.4%.