The People’s Bank of China set yuan pegging above expectations to support the currency.
To slow the currency depreciation, the People’s Bank of China (PBOC) set the yuan peg at 111 pips above the average expectation.
Thus, the PBOC set the yuan peg above expectations for its second straight day.
With negative expectations for the growth outlook of the Chinese economy, the yuan fell by almost 1% on Monday, experiencing the sharpest depreciation in nearly 5 months.
The failure of the incentive steps to meet the expectations and the divergence of policies with the central banks of developed countries were also effective in the depreciation of the yuan.
“The peg decision is a strong indication that the PBOC does not like the dollar/yuan rate to rise too quickly, especially from 7.20 to 7.25,” said Christopher Wong, Oversea-Chinese Banking Corp FX Strategist.
On the other hand, Chinese Premier Li Qiang announced that they will take more practical and effective measures to stimulate domestic demand and increase the dynamism in the markets. Li said he expects growth in the second quarter to be stronger than in the first quarter.