The confrontation between the U.S. fed and people’s Bank of China continues and, judging by the latest news, doubt that the Chinese regulator will send a clear signal to Washington, left. And most interesting is that the fed seems to respond to these signals.
Only when there was a view that the Bank of China is threatening the fed’s devaluation of the yuan in the case of reducing the rates, it seemed fun, but an incredible theory. But in recent weeks there’s been too much evidence for this scenario.
Another strong devaluation which took place last week and earlier this, gave fruit. The US Federal reserve Chairman Janet Yellen announced that the regulator will cut rates more slowly than previously expected.
The confrontation between the fed and the Bank of China
The increase in rates in the USA will lead to dollar strengthening against other currencies. Apart from the fact that the dollar itself is an undesirable scenario for most developing and developed countries, it will provoke an outflow of capital from other markets in the United States.
Meanwhile, the Federal reserve carefully monitors that the stock market is growing, as this is the only thread that still somehow provides a semblance of economic well-being. More and more analysts and experts have noted the discrepancy between official statistics with the real situation. If the fed can’t keep growing the market, it will mean almost a complete failure of monetary policy.
In recent months, almost all the actions of the us regulator were aimed at maintaining the positive dynamics of the value of assets, and that Beijing has chosen the main objective.
Once it became clear that quick of a rate increase can not wait, he returned Beijing to strengthen the yuan.
As a result, three days course grew at the fastest rate since 2005, with the rate against the yuan reached its lowest level since August 2014 that shows the features of NSC action against those who play against the yuan.
The fixed rate of the yuan reached 6,4612 per dollar, the spot rate was 6,4688.
Let’s remember all the statements by major investors acting for the short Renminbi, or the actions of speculators massively short positions opening. Just a few days took the Central Bank of China, to virtually destroy them.
Thus, the old market adage “don’t try to fight the fed” is suitable for almost everyone, but it does not belong to the people’s Bank of China.
