PBOC leans against RMB gains, sanction risks limited

The premium between the renminbi spot rate and the PBOC’s daily fix is now at its largest in over a decade, a sign that the central bank is becoming more resistant to further appreciation. The PBOC is clearly more concerned about the domestic costs of a stronger currency than it is about the external imbalances fuelling tensions with its trading partners. That may partly reflect confidence in the strength of China’s deterrence against major trade actions, which was on display this week in the narrow and underwhelming US sanctions on Chinese entities in response to its support for Iran.