Stabilising FX market is top priority, says China's central bank

The central bank of SHANGHAI said on Wednesday that stabilising the foreign exchange market is the top priority after the yuan weakened to its lowest level since the 2008 financial crisis.

The People's Bank of China PBOC said the tightly managed yuan continued to weaken against the rising U.S. dollar, falling 0.9 per cent on the day and taking its losses so far this year to over 12 per cent. The yuan hit a new record low in offshore trade.

The PBOC said that the FX market was largely operating in an orderly manner, but warned against making heavy one-way bets on the currency. It stated that the yuan has a solid basis to be basically stable.

The foreign exchange market is of great importance and maintaining stability is the top priority, according to the PBOC.

Market participants view official remarks as a sign that authorities are not happy with rapid currency movements.

The PBOC also urged members of the China FX Market Self-Regulatory Framework, which serves as a market self-regulation and coordinating mechanism, to prevent sharp fluctuations in the currency.

It said that relevant departments should strengthen expectation management to prevent speculative trading.

The PBOC said that exchange rates can never be predicted precisely, and two-way fluctuation is the norm.

Don't make a one-way bet on currency appreciation or depreciation.