Is China Really Manipulating Its Currency?

I have been seeing a lot of talk about the People's Bank of China (PBOC) as of late and how they have been devaluing the Yuan. Avi and I wrote a series of articles on this subject over the past several years where we debunked this entire premise that the PBOC was "devaluing" the Yuan with hard data. The fact of the matter was (and still is) that the PBOC was, in fact, doing the exact opposite than what most of the pundits and market participants were saying they were doing.

The PBOC was selling FX reserves heavily into the market while the Yuan was moving higher in 2015 and 2016 (sold close to 1 Trillion, a fourth of the reserves they had built up over 20 years). The new data that is currently available is showing that they have been doing no to very little intervention as of the June data, meaning that this latest move is almost all 100% market driven and likely intervention free. 

The bottom line is that intervention has a limited effect over the long-term.

Again I wrote a series of articles with Avi on this particular pair -- U.S. dollar vs. the Chinese Yuan (USDCNY) -- on MarketWatch, links to which can be found below, and the data proved that the PBOC 's intervention was not working, as the market was doing exactly the opposite of what they were attempting to do. More importantly,  we predicted this move extremely well months and years in advance of this move in the Yuan occurring.

For those interested, I have been covering the Yuan more regularly in the Forex Room here at Elliott Wave Trader with this latest movement.

Michael Golembesky is a senior analyst at ElliottWaveTrader covering US Indices, the US Dollar, and the VIX. He contributes frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trading service.