Iris Pang, economist at ING, believes that the USD/CNY will follow the dollar index in general, which shows that the yuan follows market movements before the yuan is ready to be a free float currency.
Key Quotes
“To be able to have a free float currency, the capital account has to be open. China is not ready to fully open its capital account. And forcing it to do so now means a strong chance of high volatility in the flows of funds across borders, and therefore big volatilities in the yuan exchange rate, which could create too many surprises to the market.”
“It is good for the rest of the world if China opens up its capital account gradually and carefully.”
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