China's fresh Yuan factor comes into play when national currency drops

China's fresh Yuan factor comes into play when national currency drops

Since China changed how it actually calculates the Yuan's guidance rate, traders have discovered that this factor is lopsided and also operates mostly to ongoing Yuan depreciation.

The hidden factor put in place by China’s major financial institution to diminish price swings has been at play only on days when the currency’s last session close turned to be weaker than intended.

The major bank introduced the so-called counter-cyclical factor into its formula, determining the mid-point reference rate for the Chinese currency in late May telling it would enable the Yuan’s value to better reflect demand and supply.

That secretive factor has already made it nearly unreal for the market to evaluate each day's mid-point, around which the Chinese currency is allowed to trade.

Traders suspect the fresh formula is basically aimed at keeping the Chinese Yuan steady, in particular to prevent it dropping excessively and to change market hopes as for its depreciation.

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