The first, and most benign, is that the People’s Bank of China is keen to show the yuan is a truly free-floating currency, in order to win inclusion in the basket used by the International Monetary Fund to determine the value of member-countries’ Special Drawing Rights – in effect the IMF’s internal currency.
Second, and slightly less reassuring, is the idea that China is trying to buy itself a bit of insurance against a coming Fed rate rise.
But third, and perhaps most alarming, is the argument that China has resorted to devaluing its currency in a desperate attempt to stabilise economic growth, as other levers have failed.
The first, and most benign, is that the People’s Bank of China is keen to show the yuan is a truly free-floating currency, in order to win inclusion in the basket used by the International Monetary Fund to determine the value of member-countries’ Special Drawing Rights – in effect the IMF’s internal currency.Second, and slightly less reassuring, is the idea that China is trying to buy itself a bit of insurance against a coming Fed rate rise.But third, and perhaps most alarming, is the argument that China has resorted to devaluing its currency in a desperate attempt to stabilise economic growth, as other levers have failed.
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