This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.
– Market participants are watching the PBOC’s daily fix tomorrow after the Yuan’s major breakout.
– PBOC official addresses the increasing risk of a liquidity trap and commented on monetary policy.
– Shanghai Stock Exchange introduces new rules on closing prices thanks to the trading link with more developed markets.
Hexun News:Â Chinese leading online media of financial news.
– The onshore Yuan (USD/CNY) broke the key resistance level of 6.70 on Monday for the first time since November 2010. The offshore Yuan (USD/CNH) broke the same key level last Friday. On Monday, the PBOC set the daily fix in the Dollar/Yuan rate 156-pips weaker to 6.6961, the lowest level in five-and-half years. The level of 6.70 carries with it psycho-social importance. Chinese financial institutions expected that the PBOC would intervene and hold Yuan rates around this level for a while in the effort of slowing down the pace of Yuan devaluation against the US Dollar. However, if the PBOC wants to maintain its current Yuan exchange rate regime, it needs to allow the Yuan to follow market moves. The daily fix to be set by the PBOC tomorrow will signal whether such breakout is recognized by the regulator and thus worth keeping an eye on.
– The CFETS Yuan Index was reported at 94.38 on July 15th, rising +0.13% from a week ago. This is the first increase in the Yuan index since May 20th. The other two Yuan Indexes, BIS Yuan Index and SDR Yuan Index continued to drop over the past week, falling -0.10% and -0.05% to 95.33 and 95.37 respectively. Over the same period, the offshore Yuan (USD/CNH) lost -0.13% while the onshore Yuan (USD/CNY) increased +0.09%. The Central Bank is targeting Yuan stability against the currency basket, which is mainly measured by the CFETS Yuan Index.
