China’s Currency Confusion


The Wall Street Journal today hits on something I discussed a few posts ago.  Doubts are proliferating on the Chinese central bank’s (the People’s Bank of China’s, or PBoC) capacity to manage the Chinese currency, the renminbi (or yuan).  However, the PBoC retains a much stronger element of surprise than other prominent central banks that have talked down their new monetary policy tools as “unconventional” and lost credibility in their ability to move markets toward their mandate; the retention of that element of surprise is thus allowing the PBoC to avoid overconfident investors that are certain of one-way currency bets or of the Bank’s next move in general.


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