PBOC sets USD/ CNY central rate at 7.2076 (vs. estimate at 7.3047)

<p>The Bank is accepting a falling yuan, but not at the pace the market is pricing. Another huge discrepancy between the modelled expectation and the PBOC decision. I'm not sure about the yuan as a candidate for reserve currency status if its so subject to the whims of an organ of the Chinese Communist Party. </p><p>People's Bank of China set the onshore yuan (CNY) reference rate for the trading session ahead.</p><ul><li>USD/CNY is the onshore yuan. Its permitted to trade plus or minus 2% from this daily reference rate.</li><li>CNH is the offshore yuan. USD /CNH has no restrictions on its trading range.</li><li>A significantly stronger or weaker rate than expected is typically considered a signal from the PBOC.</li></ul><p>The previous close was 7.2990</p><p>PBOC injects 168bn yuan in open market operations (OMOs) via 7-day reverse repos (RRs) at an unchanged rate of 1.9%</p><ul><li>5bn yuan of RRs mature today</li><li>thus a net 163bn yuan injection on the day in OMOs</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.