I posted on Friday on this as the news was filtering out: PBOC to change the way it calculates the yuan's daily reference rate
There is no CNY setting today, it's a holiday in China.
Instead of that, here is a more on the new regime for the daily setting. this is from ANZ:
- According to reports, the Chinese authorities are planning to change the daily yuan fixing methodology
- The introduction of a new "counter-cyclical adjustment factor" is being considered
- The new proposed fixing formula reduces the influence of the closing spot rate, and introduces greater unpredictability in the fixing
- Although there will be less volatility as a result of this change, it will result in less transparency in how the yuan fixing is set
- While there is no word on when the change will occur, it would seem that it has been put in practice since April
(Bolding above is mine_
You can see from ANZ's remarks there is much uncertainty around this change. In the detail ANZ note more:
- No longer will the 4:30pm spot rate be an anchor for the next day's fixing
- There is uncertainty over how much impact the movements in the basket of currencies will have
- It is not at all clear how the "counter-cyclical adjustment factor" is determined
- There will be a period of trial and error in order to estimate the adjustment factor
- But it would seem that the proposed fixing mechanism has been put in practice since April, with the divergence between the actual fixing and predicted a measure of the "counter-cyclical adjustment factor"
- The difficulty is that the adjustment factor may not be constant and in the same direction
- And it also gives the authorities the ability to surprise the market and set the fix where it chooses
- In that sense, the fix has moved away from being market determined, and towards becoming a tool for the authorities to guide the market
(Again, bolding is mine)
I think the only thing ANZ haven't said (so I will) .... these new procedures are ...
