China's central bank moved to change a rule that means traders will find it cheaper to short the yuan, triggering some weakness in the currency on Monday after months of strengthening.
"Overall, what this tells us is that … they're definitely trying to give a signal that maybe they're unhappy with the current pace of appreciation," said Rohit Garg, director at Bank of America Merrill Lynch.
This move also indicates that perhaps the central bank is giving onshore corporations the option of a hedge against "any sort of dollar strength that can happen on the back of any sort of uncertainty that will be coming up in the next one and a half months," Garg told CNBC's "Street Signs" on Monday.However, Garg is still positive on the yuan's strength.
"Now that China's growth is doing much better as compared to U.S. as well as the rest of the world, as well as the interest rate differential is also very much in favor of China, I would still think in the medium to long term, CNY will still be intact in terms of its … outperformance," he said.VIDEO
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