China intervened in the foreign exchange markets in final minutes of trading Wednesday to prevent an excessive fall in the value of the yuan, The Wall Street Journal reported Wednesday.
China first intervened in the currency markets on Tuesday, when it unveiled a commitment to set the yuan’s daily fixings according to the previous day’s closing spot prices and market-moves of other major currencies. The move sent the Chinese currency dropping more than 2 percent to its lowest level against the dollar in nearly four years.
However, sources told the Journal that following further precipitous declines in the yuan on Wednesday, the Peoples Bank of China then told state-owned banks to sell dollars on its behalf in the last 15 minutes of Wednesday’s trading, causing the yuan to jump about 1 percent against the greenback.
China is probably going to need to be on both sides of the currency market for a while, former Pimco chief economist Paul McCulley told CNBC’s “Squawk Box” in an interview, reacting to the news.
“This is not a just one-off 2 percent devaluation, it is part of a mosaic of trying to have the currency be a more global-orientated currency,” he said. “They want to move to a more market-determined exchange rate.”
“Markets can’t figure it out immediately,” McCulley added. “There is no text book you can pull off the shelf,” calling this a real-time learning experience.