Economics
BofA's Woo Says China Will Scrap Yuan Support After IMF Victory
- Yuan has climbed gradually since August amid intervention
- U.S. rate rise would provide an excuse for retreat: analyst
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China’s support for the yuan is likely to be pulled once the currency has won reserve status at the International Monetary Fund, according to David Woo, Bank of America Corp.’s head of global rates and foreign-exchange research.
The People’s Bank of China has strengthened the yuan gradually since an Aug. 11 devaluation with a mix of intervention and steady fixings, even as the economy showed few signs of improvement and capital outflows picked up. The support helped damp volatility in the exchange rate before the IMF conducts a twice-a-decade review of its Special Drawing Rights basket this month. Once China has SDR under its belt, it will let the yuan weaken, especially if the Federal Reserve raises rates by year-end, said Woo.