Are Renminbi speculators possibly moving out of RMB and into gold? This could be entirely plausible as RMB investors were likely seeking an alternative to the U.S. dollar and the euro in the first place. China set up its modern foreign exchange system in 1994, when it devalued the yuan by 33% at a stroke. We may just see that for the second time very soon.
On May 29, 2015, The Wall Street Journal reported that, "On May 22, 2015, Yi Gang, the Vice-Governor of the People’s Bank of China (PBoC) said at a forum in Beijing that “It’s not necessary” to bolster growth by devaluing the yuan. Mr. Yi pointed to China’s trade surplus, which has narrowed in recent years but remains relatively large, indicating Chinese exports are still strong.”
On August 12, 2015, Yahoo news reported: “China cut the yuan’s value against the dollar for the second consecutive day Wednesday, roiling global financial markets and driving expectations the currency could be set for further falls."
The daily reference rate that sets the value of the Chinese currency against the greenback was cut by 1.62% to 6.3306 yuan, from 6.2298 on Tuesday, the PBoC said in a statement on its website. The move took the reductions to 3.5% this week — the largest in more than two decades — after a surprise cut on Tuesday, but the central bank played down expectations it would continue to depreciate the currency.
The combined drop is the biggest since China set up its modern foreign exchange system in 1994,” when it devalued the yuan by 33% at a stroke.
This sudden change of course is not typical of Chinese central planners. What happened in the three months that led up to such a dramatic about-face?