Yuan's recent decline is normal, says China's currency regulator
After currency falls by 1pc over past week, SAFE says the fluctuations are nothing to worry about
The mainland's foreign exchange regulator said recent volatility in the yuan's exchange rate is normal while playing down the possibility of large capital outflows, in a statement apparently aimed at easing market concern over a sharp currency depreciation.
"People shouldn't read too much into recent fluctuations of the yuan's exchange rate, as the extent of changes remains normal in comparison with the volatilities in currencies of the developed nations and other emerging markets," the State Administration of Foreign Exchange (SAFE) said in a question-and-answer session yesterday.
People shouldn’t read too much into recent [yuan] fluctuations
After the yuan tumbled about 1 per cent in the past week and the spot rate on the onshore market fell to a near seven-month low on Tuesday, SAFE posted a statement on its website calling the gyrations "normal".
Two-way fluctuations will become a "normal pattern", as Chinese leaders deepen exchange rate reform and let market forces play a "decisive role" as pledged, which will help promote equilibrium in China's international balance of payments and prevent financial risks, the regulator said.
The mainland's favourable economic fundamentals will continue to attract long-term capital inflows, while China will be able to maintain a certain level of trade surplus as the external economic situation improves, said SAFE.
Economists believe the central bank had intervened in the market by deliberately setting a weak fixing rate every day in the past week in a bid to deter speculative fund inflows and alter market expectations for a one-way appreciation, a pattern that has lasted for four years. The mainland's unexpected surge in exports - up 10.6 per cent in January from a year earlier - was interpreted by many analysts as being a result of rapid hot money inflows through inflated trade accounts to bet on yuan appreciation.