SHANGHAI : As China's yuan climbs rapidly to its strongest levels in six years against the currencies of the country's trading partners, a notable absence of concern and intervention by the authorities is unnerving investors.
One popular theory is that the currency has been left alone while authorities focus on resetting the rules and financing options for property, technology and a host of other sectors. The alternate is that the PBOC is waiting for the Federal Reserve to begin its policy tightening, which could reduce the flow of foreign money pushing the yuan up.
OCBC Bank's head of Greater China research, Tommy Xie, points to PBOC monetary policy head Sun Guofeng's latest statements on keeping monetary conditions balanced as a sign of what's to come. Besides verbal warnings about one-way bets on the currency, authorities have on occasion tweaked reserve requirements, used their daily yuan benchmarks or had state-run banks step into the swap markets when the yuan was appreciating quickly.
One other reason why the PBOC could be resigned to the yuan's moves, analysts say, is because of the glut of dollars in the banking system, accumulated over the past couple of years as state banks and companies placed excess dollar earnings and inflows in deposits.
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