Goldman Sachs' economist Song Yu says the People’s Bank of China has halted yuan depreciation pressures and now have room to cut rates.
Bloomberg article says the PBOC's efforts to support the yuan included:
- Intervention through sales of USD/CNY
- Introducing new reserve requirements for forwards
- Making special checks of foreign-exchange trading
- (and the assistance of disappointing U.S. economic data reducing the chancesof a Federal Reserve interest-rate increase this year)
- And verbal support
- Stronger settings for the yuan in the daily reference rate setting
"The message was that we are done and that's it -- don't fight against us," said Song Yu, a Beijing-based economist at Goldman Sachs Group Inc. and the top forecaster for the Chinese economy. "Now policy makers are feeling less pressure and have more room to do what they want, with the exception of depreciating the currency."
-
If the GDP comes in disappointing today it would appear from this report that the PBOC has room to provide more stimulus.
I did see info over the weekend, though, that Goldman Sachs reckon the outflows from the yuan during the depreciation and surrounding period was much great than previously thought and the cost of yuan defense was much higher than previously calculated. Which may leave it vulnerable to renewed pressure. I'll see what else I can find on this.
