China Restates Need for Steady Yuan Amid Fragile Confidence | World News - Hindustan Times
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China Restates Need for Steady Yuan Amid Fragile Confidence

Bloomberg |
Apr 18, 2024 03:02 PM IST

China reiterated the need to prevent one-sided moves in the yuan, as a resurgent dollar and poor risk sentiment pressure currencies across Asia.

China reiterated the need to prevent one-sided moves in the yuan, as a resurgent dollar and poor risk sentiment pressure currencies across Asia.

China Restates Need for Steady Yuan Amid Fragile Confidence
China Restates Need for Steady Yuan Amid Fragile Confidence

The nation will “resolutely” put the yuan back on track when traders place lopsided bets and it’ll also try to avoid excessive volatility, the People’s Bank of China said in a report on its social media account Thursday. The Chinese currency slid to the weakest since November earlier this week on bets the US won’t rush into cutting interest rates and the world’s second largest economy will struggle to recover.

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Speaking at a press briefing in Beijing, Zhu Hexin, deputy governor of the PBOC and head of the State Administration of Foreign Exchange, said “the central bank’s goal and determination to maintain the basic stability of the yuan’s exchange rate will not change.”

The yuan was little changed at 7.2391 per dollar as of 4:59 p.m. in Shanghai. The PBOC had set its daily reference rate little changed at 7.1020 per dollar. Earlier this week, it unexpectedly weakened the fixing — which limits the currency’s moves by 2% on either side — to allow moderate depreciation.

While the PBOC commentary was a reiteration of Beijing’s usual verbal warning against speculators, it underscores authorities’ concern about wild swings in the yuan that may endanger financial stability. It also came as Japan and South Korea expressed “serious concerns” over the recent weakening of their currencies and warned they make take steps to counter any drastic volatility.

Treasury Secretary Janet Yellen acknowledged those worries during a trilateral meeting of finance chiefs in Washington, a move that may offer Tokyo and Seoul more scope to defend the yen and the won.

China will make sure that its exchange rate is mostly determined by supply and demand, according to the PBOC report, which was originally published by Communist Party-backed People’s Daily and then posted on a WeChat account run by the central bank. The yuan will be kept broadly stable, it said. 

The central bank released the report after studying a book by President Xi Jinping on China’s financial work, the PBOC said. It added the nation will maintain a prudent monetary policy and ensure the use of financial resources is efficient. 

In March, China published a compilation of excerpts of the top leader’s speeches on finance, going back to when Xi took power in 2012. State media touted his thoughts on the sector as an “important innovation” of Marxist political economy that will guide “financial development with Chinese characteristics.” One snippet from the book caught traders’ attention, prompting a scramble to interpret his words.

Doubts remained among some analysts over whether the PBOC could continue such a strong defense of the yuan. The central bank’s current position is not “sustainable,” according to Logan Wright, director of China market research at Rhodium Group, who said he believed the currency would weaken.

“I think the PBOC is doing this because they’d rather avoid immediate depreciation because that would catalyze additional capital outflows,” he said. “But eventually these long periods of stability in the exchange rate do not last.”

With assistance from Jing Li, Yujing Liu and Shuiyu Jing.

This article was generated from an automated news agency feed without modifications to text.

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