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Suspicion about PBoC FX policy shift

Kam Wei NG

Trade conflicts are risking another round of currency war. Suspicion about China’s central bank shifting to a currency devaluation policy to fight the trade war with the US has intensified since June as the Sino-US trade tension has escalated. Indeed, when US President Donald Trump criticised China (and Europe) on 19 and 20 July for manipulating their currencies to gain competitive advantages, the People’s Bank of China (PBoC) set the CNY-USD fixing on 20 July almost one percent lower than the previous closing.

Let us test the devaluation proposition by examining the PBoC’s action through the fixing. There are three parts to the renminbi fixing…

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