Why China's central bank is shoring up the yuan
In this article CNY= .DXY The Chinese yuan has tumbled to two-year lows against the U.S. dollar in the last few weeks. Sopa Images | Lightrocket | Getty Images BEIJING — China's central bank has sent a strong signal it wants to keep the Chinese yuan from weakening too quickly against the U.S. dollar, economists said. For a second time this year, the People's Bank of China announced Monday it would reduce the amount of foreign currency banks need to hold. Such moves theoretically reduce the weakening pressure on the yuan, which has tumbled by more than 8% this year to two-year lows against the U.S. dollar. Chinese authorities typically emphasize the yuan's level versus a basket of currencies, against which the yuan has strengthened by about 1% over the last three months. However, Beijing's latest actions show how important the yuan-dollar exchange rate still is, Nomura's chief China economist Ting Lu and a team said in a report Monday. They gave two reasons: ...