China’s central bank has once again issued a warning against speculative trading of the yuan and pledged to strengthen controls over hot money. The People’s Bank of China (PBOC) made its comments in an online statement that was widely circulated by Chinese media on Friday. It said the PBOC would act according to the law and prevent risks – echoing previous warnings it has issued against yuan speculation.
TAIPEI — After the yuan’s sharp slide this week versus the dollar, the People’s Bank of China issued a warning against betting on it.
According to a CNBC translation of the central bank’s statement posted late Wednesday on its website in Chinese, “do not gamble on a one-sided appreciation or depreciation of the renminbi currency rate.”
That is based on a summary of a speech delivered that day during a video conference meeting on foreign exchange by vice governor Liu Guoqiang.
The renminbi, or yuan, fell to its lowest level since 2008 on Wednesday after crossing the 7.2 mark versus the US dollar. The U.S. Federal Reserve quickly boosted interest rates this year, which has caused the U.S. dollar index, which measures the value of the dollar versus key foreign currencies, to soar to two-decade highs.
According to Goldman Sachs analyst Maggie Wei and a team, the PBOC’s statement, which calls on banks to preserve stability in the foreign exchange market, is “verbal guidance against the recent fast depreciation of the RMB.”
Nevertheless, the study stated that the yuan’s crossing of the 7.2 threshold “suggests Chinese officials are not necessarily defending a specific level of the currency rate.” The PBOC’s remark “could moderate the margin depreciation of the CNY.”
According to Wind Information, the onshore-traded yuan has declined 1.9% versus the dollar so far this week.
This month, the Chinese central bank has taken other actions to boost the yuan, such as lowering the minimum amount of foreign currency that banks must keep.