FXStreet (Delhi) – Research Team at Deutsche Bank, sees recent Chinese events as unanticipated (at least, to us) transitional stages in the progression to an eventual goal of having a freely floating exchange rate. Key Quotes “Managing the value of the RMB against a basket of currencies, if that is what the PBOC is doing, implies a limitation on monetary policy independence that we think policymakers eventually will resolve by introducing further genuine flexibility. Most capital outflows over the past year appear to have gone towards repaying foreign debts. As those debt reducing flows taper off later this year, it will be safer to allow more flexibility. In the interim, a narrowing interest rate differential versus the USD will likely continue to pressure the currency and/or foreign exchange reserves. Ultimately, it will be important to reassure domestic investors that they will earn a competitive return on their investments in China rather than converting to dollars. That will require continuing to articulate and deliver on reforms that reward private capital. March’s National People’s Congress and the promulgation of a new Five Year Plan could be important in this respect.” For more information, read our latest forex news.