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Opinion
Christopher Balding

China's Yuan Policy Is a Bad Kabuki Play

Beijing’s tweaking of the exchange rate has done little to serve its objectives in the trade war with Washington.

U.S. negotiators aren't fooled by this elaborate currency performance.

U.S. negotiators aren't fooled by this elaborate currency performance.

Photographer: Koichi Kamoshida/Getty Images

Beijing has long denied charges it manipulates the value of the yuan against the dollar. Nevertheless, the currency may be the most accurate barometer of trade relations between China and the U.S. this year. Watching its movements can reveal information about Beijing’s strategies. 

Theoretically, the yuan’s value is set against a basket of currencies compiled by the China Foreign Exchange Trade System, an arm of the central bank based in Shanghai. In practice, the CFETS RMB Index closely matches the U.S. dollar Index. When the dollar gauge rises, the greenback should strengthen against the yuan. Most of the time, this is what happens – except when it doesn’t.