First thoughts a week into currency reform

In the first week after the People’s Bank (PBC) decided to “proceed further” with exchange rate reform, the renminbi strengthened a total of 0.5% against the dollar. A little under half of those gains were delivered by the PBC setting the currency’s reference rate at a stronger level than the previous day’s close. The reference rate anchors each day’s +/-0.5% dollar trading band. The PBC sat back and allowed the renminbi to move close to the limit of that band on Monday, but intra-day movements (the blue portion of the bars in Chart 1) have since been much smaller.