Chinese yuan rally puts central bank's next moves in spotlight
SHANGHAI/HONG KONG -- This week's market turmoil stemming from Japan may have given China's central bank an unlikely assist in its battle to stimulate economic activity.
Like the Japanese yen, the Chinese yuan has been used to make carry trades -- borrowing in currencies of countries with low yields and investing in those with higher ones -- due to China's low interest rates and low volatility. Such trades had created downward pressure on the yuan. But the Bank of Japan's signal of faster-than-expected rate hikes and growing expectations for U.S. rate cuts sparked an unwinding.