That analysis comes after People’s Bank of China Governor Yi Gang addressed currency policy at a Sunday press conference during the ongoing National People’s Congress annual legislative session.
Yi expressed the view that China planned to increase flexibility in how it manages the tightly controlled yuan and described trading last year against the dollar as “quite stable,” Nomura said.
Under pressure from a slowing economy and the trade war, the Chinese currency has repeatedly tested 7 yuan to the dollar.
But it has strengthened off those lows amid soaring domestic stock markets and rising optimism over a possible resolution to the ongoing tariff conflict between the world’s two largest economies. As of Monday, the currency traded at about 6.72 to the dollar.
The currency is fixed daily by Chinese authorities against the U.S. dollar at a midpoint from which it can move as much as 2 percent in either direction. But market forces play a role and China is keen to keep a lid on money flowing out of the country.
Nomura said that injecting any kind of formal language on the stability of the yuan into a trade deal would be an attempt to keep China from devaluing the currency and to curb “excessive interventions” in it.
“In our view, a clause pressuring China to maintain a ‘stable’ yuan is neither sensible nor practical,” Nomura said.
“China is unlikely to hamstring itself with absolute compliance to such a policy, as it will let market forces play the determinate role in its FX markets,” it added.
Other analysts have noted that the U.S. demands for a stable yuan are “superfluous” on their surface because China’s central bank ultimately wants the same thing in order to entice international investors.
from Update News Zone https://ift.tt/2UqLNx7
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