China FX regulator says will use policy measures to stabilise yuan expectations
2023.07.21 02:39
© Reuters. FILE PHOTO-A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo
BEIJING (Reuters) – China’s foreign exchange regulator said on Friday it will comprehensively use policy measures to stabilise market expectations, at a time when the yuan currency faces renewed downside pressure.
China’s currency has lost about 4% to the dollar this year, one of the worst performing Asian currencies, pressured by widening yield differentials with the United States and signs of a faltering economic recovery. [CNY/]
Monetary authorities have responded to the rapid losses in the yuan in recent weeks by stepping up efforts to defend it by relaxing rules to allow companies to borrow more overseas and adjusting a daily benchmark, alongside yuan-buying trades by state-owned banks.
“In future, the yuan exchange rate has the conditions to maintain basically stable at reasonable and balanced levels,” said Wang Chunying, spokeswoman at the State Administration of Foreign Exchange (SAFE).
“Tools are meant to be used. We will adhere to comprehensive policies, focus on stabilising expectations, and take different measures based on actual conditions to provide the market with a stable environment and expectations.”
She said previous rounds of external shocks had equipped regulators with the experience, tools and measures to deal with such situations.
Wang reiterated that regulators would forcefully prevent sharp volatility in the exchange rate, while they had the basis, ability and confidence to keep operations of the foreign exchange market stable.
Market participants view such official remarks as verbal guidance against one-way bets on the currency, and persistent yuan weakness could prompt regulators to roll out more policy measures to prop it up.
The strengthened to 7.1702 per dollar, up from the previous late night close of 7.1777.
Separately, the FX regulator said overseas investors have purchased a net $79 billion worth of onshore yuan bonds in the first half of this year, reversing the net outflows seen for the whole of 2022.
