Justin was all over the breaking news on this Monday:
Bank analysts with pretty much the same take in the hours that followed:
While this policy will lock in a certain amount of capital inflow and make foreign exchange funding costs higher, its effectiveness remains in doubt
- PBOC is refraining from intervening directly in FX due to its trade deal with the US
- China's equity and debt markets are increasingly open to foreign investors ... record inflows will keep coming
- yuan's yield premium over the rest of the world is likely to remain wide
- High imported inflation and strong export growth means a strong currency may be tolerated by China
Commerzbank
- aid the move was more symbolic due to the higher rate on the yuan
Standard Chartered
- the relatively small amount of dollar liquidity being mopped up is unlikely to have a "material impact" on onshore dollar rates
The PBOC is attempting to minimise one-way betting on the yuan, while also attempting to liberalise trade in it.
While the PBOC is loathe to intervene directly, keep an eye out for other measures such as the reserve adjustment announced yesterday.
Bank analyst info via Bloomberg.
