TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

China is allowing its currency, the renminbi, to float, but it is controlling how much it will appreciate:

On the Monday after its statement, the PBOC let the currency appreciate by over 0.4%, generating quite a bit of excitement. At that rate the yuan would double in value in just 174 trading days. The next morning the central bank set its parity to reflect the previous day’s close. But as Tuesday wore on, it decided that “market supply and demand” needed a bit of a nudge. Heavy dollar-buying by the country’s big state banks, presumably at the PBOC’s behest, pushed the yuan down against the dollar, allowing the central bank to set a Wednesday-morning parity of 6.81 (see chart 1).

It’s a smart move on China’s part to try to placate the U.S., but I don’t think it’s going to matter. They aren’t going to let it appreciate as much as critics in the U.S. want (they would like our trade deficit with China wiped out).