China's Yuan To Stay Stable Despite Speculating Forces, Says PBOC

BEIJING, Jan 7 (Bernama) -- China's central has asserted that it is capable of keeping the yuan "basically stable at a reasonable equilibrium level" in spite of "speculating forces". The reassurance, made by the People's Bank of China (PBOC), came as the currency's central parity rate lost 332 basis points to 6.5646 against the US dollar Thursday, Xinhua News Agency reported. It was at its lowest level since March 18, 2011, according to data from the China Foreign Exchange Trading System. Xinhua said the renminbi's exchange rate was supposed to go along with market forces, which should be the demand and supply of foreign exchanges based on the real economy, instead of speculating forces using excessive leverage. "Some forces attempt to make profit from speculating on the renminbi. This kind of trading is unrelated to the demand of the real economy and does not reflect the real market demand and supply, which only leads to abnormal fluctuations in the yuan's exchange rates and sends the wrong signals to the market. "Faced with the speculating forces, the central bank has the capabilities to keep the yuan basically stable at a reasonable equilibrium level," Xinhua quoted an article posted on the PBOC's website. The renminbi will go with changes of demand and supply in the market and its exchange rates will change in both directions, the bank said. In addition to the central bank's determination to keep the yuan stable, the conditions are there for the currency to stay basically stable, PBOC said, citing the steady overall economy. "Even as China's export growth declined last year, the share of the country's export in the global total has still increased. There is no necessity for China to stimulate export and stabilise growth through competitive currency depreciation," it said. The central bank foresees "some uncertainty" concerning the exchange rates of the US dollar in the following period, and the impact of the US Fed's interest rate hike has largely digested by the market. The PBOC pointed to the fundamentals of China's economy as a long-term factor that will prop up the renminbi, adding there was no foundation for the currency's continuous depreciation and it remained a strong currency among international reserve currencies. -- BERNAMA