The PBOC appeared to reassure market yesterday that its devaluation intentions are modest. Here’s Goldman:
The PBOC press conference held this morning followed the recent sharp sell-off of the RMB as well as heightened market uncertainty about the implications of the reform to the CNY fixing mechanism introduced on August 11. It was attended by Deputy Governor Yi Gang and Assistant Governor Zhang Xiaohui.
The PBOC officials said that the main reasons for the reform are the need to correct the pent-up misalignment of the exchange rate (including from depreciation pressure created by a period of loose liquidity conditions) and the structural goal of transitioning the previous de-facto USD peg to a managed floating rate system. Notably, they did not mention the need to boost growth as a main reason, and also particularly ruled out the need to stimulate exports through a large (10%) depreciation.
