What to know:
- The PBOC decides to stop government bond purchases.
- The decision seems aimed at stopping the slide in yields and CNY.
- Early this week, analysts referred to the CNY depreciation as a bullish factor for crypto.
Last Friday, the People’s Bank of China implemented measures aimed at bolstering the Chinese currency, the yuan, which has been weakened recently. The devaluation of the yuan is perceived as a possible boost for Bitcoin (BTC).
This month, the People’s Bank of China has declared they will no longer purchase government bonds because the current demand outstrips the available supply.
The action indicates that policy-makers are uneasy about the falling interest rates on bonds, as they typically go down when prices increase, and the subsequent weakening of the Chinese currency (yuan).
This week, the return on a 10-year Chinese government bond dropped beneath 1.6%, signifying a massive 100 basis point decrease over the past year, as indicated by data from TradingView.
In contrast, the U.S. rate climbed up to 4.7% – a peak not seen since November 2023 – which has increased the difference in yields between the U.S. and China, benefiting the US Dollar.
In other words, due to worries about tariffs during the upcoming presidency of Donald Trump starting January 20th, the Chinese Yuan (CNY) weakened and dropped to 7.32 per USD, continuing its three-month downward trend.
This week, analysts have predicted that the weakening Chinese currency might trigger an exodus of capital, potentially funneling some funds into the cryptocurrency market, thereby boosting Bitcoin’s upward trend.
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2025-01-10 11:24