China's currency and it's exchange rate is managed by The People's Central Bank of China. It is not allowed to freely float in value in response to supply and d

China's currency and it's exchange rate is managed by The People's Central Bank of China. It is not allowed to freely float in value in response to supply and demand for it. However, it is allowed more up or down each day within a set amount, before the People's Central Bank of China will intervene, and in actuality many times the PBOC just does whatever it wants to do it. Which brings us to a few weeks ago, when overnight the PBOC decided Yuans would be worth about 2% less than the day before. The PBOC also expanded that daily trading band to 4% a day. They did this in an apparent attempt to increase exports, as Chinese goods, on paper, became Cheaper overnight, at least in terms of USD. In response to this, there has been downward pressure on the Yuan and now the PBOC, wary about capital flight among other things, needs to defend the Yuan by selling US Treasuries, for which they get US Dollars, with which they buy Yuan on the open market, decreasing the supply of Yuan available, which puts upward pressure on its value. The biggest ramification, I would say, has to do with interest rates on US Treasuries, which influence all types of other debt instruments such as home loans, and of which China has been a huge buyer over the past decade and a half. The interest rate on a 10 Year Note is dictated by how much demand there is for the note. If a lot of people want the note, you can get away with offering a lower interest rate, but if few people want to buy it, you need to increase the rate to attract more buyers.