BEIJING/SHANGHAI (Reuters) – China’s central bank spoke out against big currency swings on Tuesday, saying it will take steps to stabilise expectations, and keep the yuan basically stable.
The People’s Bank of China (PBOC) also said that the yuan did not necessarily need to weaken against the dollar when the index measuring the U.S. currency’s performance against a currency basket rises.
There have been cases in recent years where “the dollar appreciates, but the yuan is stronger,” it said.
The PBOC will “take comprehensive measures, stabilise expectations, resolutely curb big ups and downs in exchange rates,” the central bank said in an article posted on its website. It would also act to “keep the yuan basically stable on a rational, equilibrium level,” the PBOC added.
The yuan has slumped more than 11% against the dollar this year, touching at one point its weakest level since the 2008 global financial crisis, weighed down by U.S. monetary tightening, China’s economic slowdown and capital outflows.
The central bank said it has ample policy room, many tools and “rich experience in effectively managing market expectations, and safeguarding exchange rate stability”.
The PBOC said that China’s solid economic fundamentals were the best stabilizer for exchange rates, adding yuan assets were safe and “global recognition of the yuan will keep rising.”
The central bank also said it will deepen currency market reforms, improve flexibility of the yuan, and warned against one-way bets.
“There’s no way to predict exchange rates accurately, and two-way fluctuation is the norm,” the PBOC said.
Also on Tuesday, China’s foreign currency regulator said it has been pushing banks to provide better risk-hedging services to companies amid greater yuan flexibility.
The Sichuan branch of the State Administration of Foreign Exchange (SAFE) launched a campaign to promote yuan derivatives, so that companies are “daring, willing, and able” to hedge risks, the watchdog said.
(Reporting by Shanghai newsroom; Editing by Andrew Heavens and Tomasz Janowski)
