FXStreet (Delhi) – Michael Every, Research Analyst at Rabobank, notes that the PBoC has pledged that they are able to keep the renminbi’s exchange rate stable at a reasonable level even as CNH drifted towards 6.45.
Key Quotes
“As a new reserve-currency central bank the PBoC will need a playbook. Will they follow the dusty British pamphlet from the late 1920s, where there was a painful ideological commitment to maintain currency stability (versus gold) for years at the expense of biting deflation and unemployment before finally cracking, and devaluing, in 1931? Or will they follow the US edition, where everyone official always says they want a strong USD while generally allowing the broad Dollar index to drift lower where possible? (It was at 99.8 this morning vs. 151.4 in 1984 and 123.8 back in 1969, for example.)”
“China and the US will certainly have more in common as the former joins the latter at the top table. Yet regrettably one of those things is a struggling manufacturing sector due an over-valued currency.”
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