‘Strong, sta­ble’ ren­minbi gains strength against the dol­lar

China Daily (USA) - - FRONT PAGE - By WANG YANFEI in Bei­jing wangyan­fei@chi­nadaily.com.cn

The cen­tral par­ity rate of the yuan against the US dol­lar strength­ened on Mon­day af­ter Yi Gang, vice-gov­er­nor of the cen­tral bank, said on Sun­day that the cur­rency re­mained strong and sta­ble in the global mon­e­tary sys­tem.

The Peo­ple’s Bank of China set the cen­tral par­ity rate of the yuan ver­sus the dol­lar at 6.9042, tick­ing up from the 6.9168 on Fri­day, af­ter the cur­rency slid to an eight-year-low against the dol­lar in the past week.

The jump came af­ter Yi’s re­marks on the yuan’s ex­change rate on Sun­day, when he fended off con­cerns over the strength of the yuan and fu­ture pres­sure for de­pre­ci­a­tion.

In an in­ter­view with Xin­hua News Agency, Yi reaf­firmed that the cur­rency re­mained strong among ma­jor cur­ren­cies.

Yi at­trib­uted the yuan’s re­cent de­pre­ci­a­tion to ex­ter­nal fac­tors, in­clud­ing sus­tained im­pact from Bri­tain’s ex­pected exit from the Euro­pean Union, a likely in­ter­est hike in the near fu­ture in the United States and signs of im­prov­ing US eco­nomic fun­da­men­tals.

“The yuan did not weaken much com­pared with other cur­ren­cies in the emerg­ing mar­kets,” said Yi.

Since a more float­ing ex­change rate sys­tem for the yuan was adopted in Au­gust last year, the mar­ket should ob­serve the yuan’s fluc­tu­a­tion against a bas­ket of cur­ren­cies in­stead of fo­cus­ing on its change against the dol­lar, ac­cord­ing to Yi.

He did not see a long-term de­pre­ci­a­tion trend be­cause, he said, the yuan has “strong and sta­ble char­ac­ter­is­tics”. He noted that in the past five years, the yuan’s China For­eign Ex­change Trade Sys­tem index and its index against the Spe­cial Draw­ing Rights cur­rency bas­ket ap­pre­ci­ated by 10.9 per­cent and 4.4 per­cent, re­spec­tively.

Yi’s com­ment eased some con­cerns amid mar­ket ex­pec­ta­tions of a short-term de­pre­ci­a­tion of the yuan, ac­cord­ing to Zhao Xue­qing, an econ­o­mist with the In­ter­na­tional Re­search In­sti­tute of the Bank of China.

The down­ward pres­sure on the yuan, mainly driven by a strong dol­lar, may con­tinue next year, but the yuan will not de­pre­ci­ate at a dras­tic pace, ac­cord­ing to Zhao.

“If it does iden­tify out­flow reach­ing a level that would spark a ma­jor fi­nan­cial cri­sis, the gov­ern­ment would take nec­es­sary steps to fend off the risks,” she said.

The yuan did not weaken much com­pared with other cur­ren­cies in the emerg­ing mar­kets.” Yi Gang, PBOC vice-gov­er­nor

Yi Gang, vice-gov­er­nor of the Peo­ple’s Bank of China

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