I posted a few moments ago on Deutsche Bank says EUR/USD to revisit year lows soon, forecast 1.05 by year-end
In their analysis at that post, Deutsche Bank referred to China's 'opportunistic' weaker currency policy. What is that? To expand, Alan Ruskin, Deutsche Bank's global co-head of FX research, refers to China FX policy is "opportunistic"' as meaning:
- As the USD has strengthened, the PBOC has "tended to keep the yuan index broadly steady". (That's since July.)
- This "adds to the perception of a subtle asymmetry, whereby China targets USD/CNY when the USD is weaker (as per much of H1) and, targets the TWI when the USD is stronger (in recent months)"
- What this means over time is yuan index goes lower if the USD is weak, while USD/CNY goes higher when the USD is strong
Markets also expect the PBOC to undertake rebalancing of China's FX reserves:
- "As China loses USD reserves by intervening on USD/China, it rebalances its FX portfolio by selling EUR"
