BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/02
To calm forex markets and reduce depreciation pressure on the yuan, the People’s Bank of China employed the fairly heavy-handed measure of squeezing the availability of offshore yuan (Hong Kong, CNH), thereby driving down the difference in offshore and onshore (Shanghai, CNY) yuan-dollar exchange rates. The measure initially caused offshore yuan market rates to soar at the start of this week (CNH Hibor7D reaching 33 %). While the CNH interest rate fell after Wednesday’s session and the situation on forex markets calmed, China’s slowing growth, deregulation of currency movements and shifting exchange rate policies will keep markets on edge.