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Goldman Sachs Sees China Using Fixing to Strengthen Currency

  • Policy makers favor stronger yuan amid capital outflows
  • Offshore yuan posted record rally last week on short squeeze
Bloomberg business news

Where Does the Chinese Yuan Go in 2017?

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China’s central bank has altered its yuan fixing mechanism since the U.S. presidential election in favor of a stronger currency as capital outflows mounted and President-elect Donald Trump threatens to adopt protectionist trade policies, according to Goldman Sachs Group Inc.

Before Nov. 8, broad dollar moves and the closing yuan price explained 90 percent of the next day’s yuan fix, validating the government’s publicly-announced methodology, strategists led by Robin Brooks wrote in a note Monday. The correlation has since fallen to 80 percent. The People’s Bank of China sets the fix daily and lets the yuan move 2 percent of either side.