The People’s Bank appears to have been pushing against the renminbi’s strength for a while. This week, finally, the market responded. The PBOC doesn’t have much tolerance for sharp market moves and probably won’t want to see depreciation continue at the rate of the past few days. But in an environment of weakening export demand, and with no major domestic inflation concerns, it is likely to welcome a period of gradual depreciation. Meanwhile, although the extension of some control measures in Shanghai is unwelcome news for many, community transmission of COVID-19 in the city is now in rapid retreat and most economic indicators are showing gradual recovery.
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