China lets yuan break 7-per-dollar level for first time in over a decade

Re:China lets yuan break 7-per-dollar level for first time i... by hn_throwaway_99 on Monday August 05, 2019 @01:46PM (#20616326)

The whole first part of your post, though, still doesn't affect someone who owns actual currency, e.g. money in a bank account, as opposed to assets (e.g. shares in a Chinese exporter), which is what I was responding to. If that Chinese TV exporter ends up doing great because of devaluation, that doesn't benefit you if you just have actual yuan.

[ Parent | on HN ]

Re:China lets yuan break 7-per-dollar level for first time i... by benj111 on Monday August 05, 2019 @02:20PM (#20616748)

It depends at what level you want to look at it. If the economies doing well your money is more likely to find productive investments, alternatively the central bank could increase interest rates to regulate the economy, both would be good for you personally as well as tending to push rates up.

My greater point was that exchange rates tend to be self regulating (in this situation), you'd expect it to return to mean rather than get stuck in a feed back loop. This is China though so I have no idea how much they need to heed economic reality.

[ Parent | on HN ]

Re:China lets yuan break 7-per-dollar level for first time i... by thedudeabides5 on Monday August 05, 2019 @02:52PM (#20617246)

Sure, and therein lies the difference in incentives between those with lots of CNY denominated assets (owners, aka the rich) and those who's employment and/or income is more tied directly to the demand conditions faced by exporters (workers, aka the poor).

Once the 7 line is crossed, owners are more likely to seek diversification through getting out of CNY and into USD/Gold.

Some of that downward pressure on the FX is likely good for demand in China (hence Trump saying they are doing it competitively) but it's also bad for liquidity in China (to the degree people start to price in further devaluations and capital flight kicks up again).

That's the balancing act the PBOC is trying to manage.

Thusfar they've done a pretty good job balancing, though it remains to be seen how the end game looks.

[ Parent | on HN ]