PBOC is “alarmed” by the weakness of the yen (concerned over yuan implications)

Via Saxo Bank on the yen and yuan:

• Says the People’s Bank of China is concerned (‘alarmed’ according to Saxo analysts) by the weakness of the JPY given how competitive Japanese exports are
• And that if the yen weakens past 152 per dollar, “we could likely see the PB0C letting the onshore yuan weaken further towards 7.25”
• And that this runs against PBoC wishes, the Bank does not have a steady weakening bias for the yuan

—

Putting this in context:

• both countries are barely out of deflation according to their own official data
• both yen and yuan are under weakening pressure
• yen is a champion carry currency (CHF too) and yuan is being eyed that way also (not to the same extent but there is movement that way)
• both central banks remain under pressure for monetary stimulus

I posted at the turn into the new year of the pressures on the PBoC not to ease due to their concern about a weak yuan:

• CNY stability is necessarily a competing, and arguably more urgent/important, objective that supplants policy easing.

That has continued, and continues, to play out. Every day we get the PBOC CNY reference rate setting shwong the Bank propping up the currency. The battle continued yesterday:

CNH is not subject to the limitations imposed on CNY movement (that’s a simplistic explanation, but its close)

This article was written by Eamonn Sheridan at www.forexlive.com.