China Paces Yuan Gains to Shield Exporters, Curbing Carry Trade

The Chinese yuan’s appreciation since April is unfolding at just the right pace to neutralize any benefits from holding higher-yielding dollars — and puts it on course to hit 7 against its US counterpart by the end of March next year.

While the People’s Bank of China doesn’t divulge its motives, it guided the currency at this pace with fixings that were initially above the market rate and subsequently sought to slow the yuan’s gains. The measured pace discourages domestic traders from borrowing in yuan to buy and hold dollars, while also preventing a sudden and disruptive repatriation flow of money.