China Stabilizes Yuan in 2022 Through Bank Steering and Restrictions, Avoiding Reserves Drawdown
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China has stabilized the yuan this year through moral suasion and steering banks, rather than spending reserves like in 2015. This shows concerns about decoupling from the West.
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The PBOC guided the yuan trading band through its daily midpoint fixings, diverging from market expectations to signal no further falls.
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State banks made discreet yuan purchases around key levels to contain volatility, while pressuring banks and exporters to cut dollar assets.
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Regulators summoned banks in September, set restrictions on dollar buying over $50 million, and ramped up surveillance of exporter currency flows.
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The strategy chilled trading with yuan volumes down 73% in October, but stabilized the currency over 16-year lows for now. Market players still hold dollars awaiting a better price.