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Daniel Ren

China’s central bank said on Thursday that an adjustment to close the gap between the yuan’s mid-price and its actual trading rate is “basically completed” and that the currency will remain strong in the long run.
Zhang Xiaohui, assistant governor of People’s Bank of China (PBOC), said at a press conference in Beijing that the value of the yuan had gradually returned to market levels after declines during previous days, and that the yuan would remain strong in the long term with no basis for persistent and substantial depreciation.
Zhang added that previously there was a 3 per cent gap in the yuan’s value between the rate and market expectations.
China set the reference rate for its currency more than 1 per cent lower against the US dollar on Thursday, its third consecutive reduction.
It came after Beijing conducted a one-off devaluation of the yuan on Tuesday, which has weakened about 4 per cent in the past two days.
The central bank reformed the system to set the daily fixing, or the midpoint – giving market forces full play in deciding the yuan’s exchange rate.
The move heightened worries about a depreciating yuan as a way to bolster the mainland’s slowing exports and a currency war with other economies ahead of expected interest rate hikes in the US dollar.
Watch: Europe's luxury brands feel yuan pinch

Yi Gang, Beijing’s top foreign-exchange regulator, strongly denied earlier speculation that Beijing had planned to orchestrate a 10 per cent devaluation to support the mainland’s export sector.
“As a central bank official, I am not entitled to recklessly comment on currency exchange rates,” Yi, director of the State Administration of Foreign Exchange (SAFE), told the press conference.
Yi, who is also a deputy PBOC governor, said: “But it is purely groundless that China would weaken yuan by 10 per cent to boost exports.”
After the yuan had slid further during early Wednesday trading, currency dealers had said Chinese state-owned banks were seen selling dollars on behalf of the central bank to restrain the yuan’s fall, and the spot market rate recovered late in the day to close 6.3870.
“Apparently, the central bank does not want the yuan to run out of control,” said a trader at a European bank in Shanghai.
However, sources involved in the Chinese policy-making process said powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 per cent.
The International Monetary Fund said China’s move to make the yuan more responsive to market forces appeared to be a welcome step and that Beijing should aim for an effectively floating exchange rate within two to three years.
Beijing has been lobbying the IMF to include the yuan in its basket of reserve currencies known as Special Drawing Rights, which it uses to lend to sovereign borrowers, which would enable more international use of the yuan.
William Dudley, head of the New York Federal Reserve, also said an adjustment to the yuan was probably appropriate if the Chinese economy was weaker than the authorities had expected.
On Thursday the yuan narrowed some of its losses against the US dollar in both onshore and offshore spot markets after the central bank said it would maintain the exchange rate at a roughly stable level.
The onshore yuan bounced back from an intraday weak level of 6.4433 at 10.15am to trade at 6.4079 at noon on Thursday, but it is still 0.35 per cent weaker than at Wednesday's close.
The offshore yuan rose from an intraday low of 6.5111 at 9.15am to trade at 6.4443 at noon on Thursday - 0.16 per cent lower than at the close on Wednesday.  
Additional reporting Jeanny Yu and Reuters


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Yuan’s adjustment ‘basically complete and currency to stay strong in long run,’ says China

China's central bank says the devaluations are to designed to take more account of market forces. Photo: SCMP Pictures

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.css-sioo19{color:#c79a00;}Breaking | Yuan’s adjustment ‘basically complete and currency to stay strong in long run,’ says China

Breaking | Yuan’s adjustment ‘basically complete and currency to stay strong in long run,’ says China