BEIJING 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.
This year, China's currency has lost 4 per cent to the dollar, one of the worst performing Asian currencies, pressured by increasing yield differentials with the United States and signs of a faltering economic recovery.
Monetary authorities have responded to the rapid losses of the yuan in recent months by relaxing regulations to allow firms 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. We adhere to comprehensive policies, focus on stabilizing expectations, and take different measures based on actual conditions to provide a stable environment and expectations for the market. She said the previous rounds of external shocks had equipped regulators with the experience, tools and measures to deal with such situations.
In an interview, Wang said that regulatory authorities 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 a persistent yuan weakness could prompt regulators to roll out more policy measures to prop up the currency.
Onshore yuan rose to 7.1702 per cent, up from the previous close of 7.1777.
In the first half of the year, the FX regulator said that foreign investors have purchased a net $79 billion worth of onshore yuan bonds, reversing the net outflows seen for the whole of 2022.