June 29, 2015

China Agrees To “Limit” Intervention In Currency Markets

According to Politico’s “Morning Trade,” last Wednesday Chinese officials agreed to limit their intervention into foreign exchange markets. Though the officials didn’t explain what the announcement meant specifically, U.S. Treasury Secretary Jack Lew praised the news, arguing the announcement presents “a much tougher commitment that reflects what we [the United States] all had in mind, but they [Chinese officials] weren't willing to say last year. I think that is very significant.” Secretary Lew did admit China still has work to do when it comes to allowing its currency to appreciate, but said that it is “important that we acknowledge that progress.”

According to The Wall Street Journal, “In its first-quarter report on monetary policy, the People’s Bank of China said it had stopped its ‘routine intervention’ in the currency markets aimed at managing the yuan’s value.” Additionally, “The U.S. Treasury also has said China last year appeared to have stopped its large-scale foreign-currency purchases that keep a lid on the yuan’s value and help spur exports, though opaque data indicated ‘modest foreign-exchange purchases’ by Beijing earlier this year.”