China's central bank to deepen reform in foreign exchange market

China's central bank to deepen reform in foreign exchange market

The People's Bank of China will continue its efforts to deepen reform in the foreign exchange market and refrain from a drastic ups and downs in the Chinese currency, despite the possibility of a one-sided performance of the renminbi exchange rate, according to an article released by the country's central bank on Tuesday.

The PBOC said that the exact renminbi exchange rate can't be predicted under the market-based foreign exchange formation mechanism. The two-way volatility of the Chinese currency is normal, while a one-sided performance will not occur.

The deprecation of the renminbi is smaller than the appreciation of the US dollar index during the same period, although the renminbi has recently depreciated against the US dollar. The Chinese yuan has become one of the stronger currencies in the world as a result of the recent appreciation of the currency against the euro, British pound, and Japanese yen, according to the PBOC.

Since foreign exchange reform in 2005, the annual volatility rate of the renminbi has remained between 3 and 4 percent. The renminbi exchange rate has changed quickly due to the trade friction between the United States and China, COVID 19 pandemic, world economic slowdown, global inflation and monetary tightening in developed economies. The PBOC said that Renminbi has shown stronger elasticity, which is effective offsetting various impacts.

The world will show rising recognition over the Chinese currency as Renminbi's long-term trend continues. It said that the assets of Renminbi are safe.

Given the adequate policy room and rich reserve of tools, the PBOC will stick to normal monetary policies. The Chinese central bank said that policies will be implemented comprehensively to keep market expectations stable and renminbi's exchange rate stable.