On Friday, China’s central bank took steps to support the yuan, which has been losing ground, and its depreciation was seen as a potential tailwind for bitcoin (BTC).
The People’s Bank of China announced that it will stop buying government bonds this month as their demand now outstrips supply.
Experts said the move reflects policymakers’ discomfort with sliding bond yields, which move in the opposite direction of prices, and the resulting depreciation in the yuan.
The yield on the benchmark 10-year Chinese government bond dipped below 1.6% earlier this week, marking a staggering 100 bps drop on a 12-month basis, according to data source TradingView.
Meanwhile, its US counterpart rose to 4.7%, the highest since November 2023, widening the US-China interest rate differential in favor of the USD.
As such, the CNY fell to 7.32 per USD, extending its three-month losing streak, led in part by concerns about tariffs during President-elect Donald Trump’s term in office, set to begin on January 20.
Earlier this week, analysts said the falling yuan could result in a capital flight, some of which could find its way into the crypto market and add to BTC’s bull momentum.
