Chinese Yuan Tumbles, Two PBOC Bosses Say Its Level Is Fine
Tang Shihua
DATE:  Jul 03 2018
/ SOURCE:  Yicai
Chinese Yuan Tumbles, Two PBOC Bosses Say Its Level Is Fine Chinese Yuan Tumbles, Two PBOC Bosses Say Its Level Is Fine

(Yicai Global) July 3 -- China's central bank has once again said it will keep the Chinese yuan's exchange rate at an appropriate level despite the fact that June was the most weakening month to the currency ever.

China has been implementing a managed floating exchange rate policy, which was based on the market demand and supply, as well as adjusted with reference to the special draw right of the Chinese yuan, Yi Gang, the central bank's governor said in an interview with the China Securities Journal. Through years of practice, this policy has been proven to be effective, he added.

The yuan fell to 6.7204 per dollar today, its softest since Aug. 7 last year. The central bank set the midpoint at 6.6497 yuan per dollar, its lowest fixing in about 10 months. The Chinese currency's 3.3 percent depreciation in June was its worst month ever.

The People's Bank of China is keeping a close eye on the fluctuation in the recent foreign exchange market. The volatility is mainly attributable to factors like the stronger US dollar and external uncertainties, which showcases a pro-cyclical behavior, Yi said.

Four traders told Reuters that major state-owned banks were swapping yuan for dollars in the forwards market and immediately selling some of them into spot market, which helped prop up the Chinese currency.

Mainland stocks rebounded at the close today. The Shanghai Composite rose 0.41 percent after earlier plunging as much as 1.9 percent, while the SZSE Component index gained 0.45 percent. The upcoming Friday deadline for the US trade tariffs on USD34 billion worth of Chinese goods has dampened the investor sentiment this week.

China has good economic fundamentals, with financial risks controllable in general, Yi said, adding that the transformation and upgrading are accelerating, while China's economy has entered a stage of high-quality development, and the balance of international payments, as well as cross-border capital flows, are stable.

Earlier today, Pan Gongsheng, the bank's deputy governor stressed a similar tone that the forex rate is reasonable.

Editor: Emmi Laine 

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Keywords:   Central Bank,CNY,USD,Currency Market,Forex,SDR,Stock Market,Pboc,Yi Gang,PAN GONGSHENG