The results of a Bloomberg survey suggest that the market expects China’s policy makers to intervene should the yuan continue its downward path, citing the 6.7 yuan-to-dollar level as a likely inflexion point.
The yuan would need to fall around a further 1% to reach this level. The Chinese currency has dropped 3.4% in the past two weeks on the back of fears of a coming economic slowdown in the next quarter and a looming US-China trade war. The country’s two stock exchanges are now both considered to be bear markets.
The yuan is already fixed to a 2% daily swing from a reference rate set by the central bank, but respondents of the survey suggested that this could be tightened to avoid breaking the 6.7 level, alongside other measures such as capital controls and tighter liquidity between banks.