China’s most recent efforts to talk up the yuan follow similar efforts earlier this year. Bets against the currency will fail and calls for a large depreciation are “ridiculous,” Han Jun, deputy director of China’s office of the central leading group for financial and economic affairs, said on Jan. 11.
Xinhua might actually be more convincing than the PBOC, said Zhou Hao, an economist at Commerzbank AG in Singapore.
"We always say the PBOC lacks independence, but if you look at Xinhua, you can say this is from the Chinese government, which is the actual policy maker in China," Zhou said. "Its track record shows that they normally have relatively powerful instruments to maintain stability -- at least for a while."
Short-Sellers
China’s central bank has told some banks in Hong Kong to suspend offshore yuan lending to curb short selling and tighten liquidity, said people with knowledge of the matter. This comes after Xinhua said on Saturday that yuan speculators entering short positions are expected to “suffer huge losses” as policy makers will take measures to stabilize the currency.
The yuan’s relative stability over the past week has convinced Royal Bank of Canada and Commerzbank, whose end-2016 forecasts for the yuan are 6.95 and 6.9, respectively, to predict that the exchange rate will be steady until around March 31 before dropping again. Both say it makes more sense to short assets that are harmed by the Chinese slowdown, rather than the yuan itself.
“At the end of the day, the exchange rate should be driven by macroeconomic fundamentals," said Sue Trinh, the Hong Kong- based head of Asia foreign-exchange strategy at RBC. "The end game is these capital controls are inconsistent with China’s goal to internationalize the yuan. You’ve got to make a choice."