China’s central bank on Friday took steps to support the yuan, which is losing ground, with its depreciation seen as a potential tailwind for Bitcoin (BTC).
The People’s Bank of China said it would stop buying government bonds this month as 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 points decline over 12 months, according to data source TradingView.
At the same time, its U.S. counterpart rose to 4.7%, its highest level since November 2023, widening the U.S.-China yield gap in favor of the dollar.
Thus, the CNY slipped to 7.32 per dollar, extending its three-month losing streak partly due to concerns over tariffs under President-elect Donald Trump’s term set to begin on January 20.
Earlier this week, analysts said the falling yuan could lead to capital flight, some of which could end up in the crypto market and reinforce BTC’s bullish momentum.
