Investing.com - The People's Bank of China has plans to tweak the way it sets the yuan’s daily reference rate to the U.S. dollar to add a “counter-cyclical factor” to the pricing model it offers to market makers.
The PBOC has fine-tuned the pricing mode in the last couple of years by taking reference to the yuan-dollar closing price and the yuan’s value against a basket of currencies.
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But the China Foreign Exchange Trade System said the mainland’s foreign exchange market was susceptible to “irrational expectations” that could exaggerate one-sided sentiment. A “counter-cyclical” factor in the pricing model could help offset the “herd effect” and bring the yuan’s central parity in line with economic fundamentals, it said.
No details about the factor have been made public, but the yuan’s recent stability has been noted in the market and called into question in the face of expected hikes by the Federal Reserve in interest rates this year.