China yuan: worst over after volatility went ‘beyond expectations’, US dollar may weaken, Beijing says
- China is better positioned to deal with currency volatility and cross-border capital flows, says Pan Gongsheng, deputy governor of the central bank
- Economic growth momentum is recovering quickly as the impact of the pandemic subsides and government stimulus kicks in, Pan says
The worst is over for the yuan, according to Chinese regulators, who say resources have been mobilised to shore up the economy and the US dollar could weaken due to the Federal Reserve’s dilemma of balancing growth and inflation.
The economy is now better positioned to deal with currency volatility and cross-border capital flows, two key parameters used to measure the health of China’s external sector, Pan Gongsheng, deputy governor of the People’s Bank of China (PBOC), said on Thursday.
“Yuan exchange rates are basically stable with two-way fluctuations,” he said, attributing recent volatility to changes in the domestic and external environment since March that “had gone beyond expectations”, including a stronger US dollar.
“But the yuan has been relatively stable compared to the level of depreciation of other major currencies against the US dollar. And it has been stable against a basket of currencies.”
The US dollar index in early May rose to a 20-year high of 104 in anticipation of more aggressive rate hikes in coming months.