In practicality, the PBoc will have to buy USTs in order to weaken their currency although China are already the largest holder of USTs outside of the Fed.
- To weaken CNY the PBoC will be buying USDs (as well as other currencies) in the market, a move that could strengthen the USD against other major currencies.
- However, several analysts have noted that today's decision is likely to be a one-off adjustment and further CNY devaluation is not likely.
- Some have speculated that a stronger USD could delay the Fed from hiking in the near-term, however the Fed will want to keep credibility and are likely to cite policy independence.
- No Fed speakers are scheduled to speak until tomorrow when Fed's Williams is due at 1330BST.