A few adjustments
- Gap different for each currency, as observed in the past week, EUR and JPY has a gap of at least 0.5%
- Central parity is based on the closing price of the previous trading day. Since these are just some numbers within the gap of the previous central parity, depending on how the market interacts with the intervention. This would probably be the reason for a crawl, without adjusting the basket content
- I revised my understanding on the crawl, but the explanation is still incomplete -- I need some more work in analyzing the numbers
- So far PBC has been keeping a tight hand on USD/RMB, while leaving EUR and JPY wandering further away from the central parity. Such maneuver might impact the cross rate in the international markets
PBC announced that the gap (right click to download pdf report in Chinese) will be "adjusted in appropriate time according to changes in market condition". Many previously said points were re-iterated, such as the central parity will remain fixed, but the mechanism will go through a change in "gradualism" (widening gap is one of them). - see English re-cap here.
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