Why the Yuan’s Mood Swings Are Still Had-YO-Make-It-Feel‑Like‑A-Drama
At least for the moment, the Chinese yuan looks like it’s stuck on a roller‑coaster that’s already passed the scary part. Even as the 10‑year government bond yield stays locked between 1.60% and 1.63%, the currency is itching for a downward plunge.
Central Bank’s “Smooth‑Sailing” Plan
- On Friday, the People’s Bank of China will float 60 billion yuan of bills in Hong Kong: 40 billion for 3‑month bills, 20 billion for 1‑year bills.
- The tender will settle on February 18 and will be open for competitive bidding via the Hong Kong Monetary Authority’s Central Moneymarkets Unit.
- Goal? Stabilise the currency—but the commentary suggests the yuan will keep its bearish vibes, especially if the global trade climate stays shaky.
Yield That Won’t Budge
Bond yields are staying subdued and consistent—no big leaps, no huge drops. That’s a sign the central bank might keep its accommodative policies in place to keep the economy humming.
Trump’s Tariff Show
Meanwhile, President Trump’s tariff upgrades keep injecting a bit of drama:
- Aluminum tariffs jump from 10% to 25% on March 12.
- Chinese steel imports have a 2% share of U.S. steel imports last year—small, but the spike adds a layer of uncertainty.
Those policy moves could keep the yuan a bit jittery, especially if capital starts flowing out while interest‑rate spreads widen.
Bottom Line
So while the central bank’s extra bill issuance aims for a calm tide, the currency’s still ready for a “down turn”—given the current trade tensions and the significance of interest‑rate spread differences.
