On Friday, China’s central bank moved to support the yuan, which has been losing ground, with its depreciation seen as a potential tailwind for bitcoin (BTC).
The People’s Bank of China announced it will stop buying government bonds this month as their demand now eclipses supply.
Experts said the move reflects policymakers’ discomfort with falling bond yields, which move in the opposite direction to prices, and the resulting depreciation of the yuan.
The yield on China’s benchmark 10-year government bond fell below 1.6% earlier this week, marking a staggering 100 basis point drop in 12 months, according to data source TradingView.
Meanwhile, its American counterpart rose to 4.7%, the highest level since November 2023, widening the yield differential between the United States and China in favor of the dollar.
As such, the CNY fell to 7.32 per dollar, extending its three-month losing streak led in part by concerns over tariffs during President-elect Donald Trump’s term that begins on January 20.
Earlier this week, analysts said that the yuan’s decline could result in capital flight, some of which could reach the cryptocurrency market and increase BTC’s bullish momentum.
