The Chinese yuan fell against the U.S. dollar for the third day this week as the government tightened control over the illegal capital inflow into the country’s financial system.
The demand for the local currency may decline as the new rules give market regulators a greater authority in the payments investigations. People’s Bank of China kept yuan almost unchanged to the U.S. dollar since the start of the third quarter after it gained 2.3 percent in the second.
Currency strategists expect that the new rules will cool down the inflow of the speculators’ money that bet on the fast appreciation of the yuan. With less demand for the dollar-to-yuan conversion operations, the pace of the yuan’s strengthening may slow down significantly.
Analysts also note that the previous regulations were targeted on the money outflow, stimulatating growth and inflation. The new regulation rule indicate that the situation in China has changed from the lack of foreign exchange reserves to the excessive growth that needs to be kept down a little.
USD/CNY rose from 6.8530 to 6.8659 after the central bank has set the reference rate for yuan at 6.8555. Chinese currency is allowed to fluctuate at no more than 0.5 percent in either direction from that rate in a single trading day.
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