Chinese state media says yuan unlikely to continue depreciation

Chinese state media says yuan unlikely to continue depreciation

The state-owned Securities Times said on Thursday that China's yuan is unlikely to continue depreciating as currencies continue to be pressured by a U.S. dollar boosted by hawkish Federal Reserve monetary tightening.

The paper said that Prudent balance of payments has lent support and led somewhat restrained losses in the yuan compared to peers.

As long as market expectations can be stabilised and the policies to support domestic economic growth continue to take effect, it will be hard for the dollar index to cause huge volatility to the yuan, it said.

Market participants usually view state media commentary as a sign that authorities are uncomfortable with rapid currency movement.

The yuan has fallen more than 11% against the dollar this year and looks poised for its biggest annual decline since 1994.

The People's Bank of China has warned of heavy one-way bets on the currency, because it said stabilising the yuan is a top priority and urged market participants to not make heavy one-way bets on the currency.

Financial institutions must increase their foreign exchange risk reserves to purchase currencies through forward contracts this week, a move that makes bets against the yuan more expensive.

Monetary authorities are asking local banks to revive a yuan fixing toolkit abandoned two years ago as they work to defend the rapidly weakening currency, a person familiar with the yuan rate-setting process told Reuters late on Tuesday.