Re-fixing the Yuan

One of the biggest losers from the recent flare up in trade tensions between the U.S. and China was the Yuan. In response, the PBOC lowered its official Yuan mid-point to USD 6.8649 to minimize further currency weakness. However, this has led to a widening spread between the onshore (CNY) and offshore (CNH) exchange rate, and more speculation against the currency. Though a weaker Yuan could help growth through increased exports, there remains a risk of large capital outflows that could de-stabilize the financial system.



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