BEIJING, July 4 (Xinhua) -- Central bank officials expressed full confidence on Tuesday in maintaining a stable and reasonable exchange rate for yuan against the backdrop of escalating China-US trade friction and a strong US dollar.
The yuan weakened to its lowest level against the dollar this year, with the onshore sopt trading price falling to 6.7176 in the morning before rebounding to 6.6492 by 5pm. It has weakened by 2.4 percent against the dollar since the beginning of this year.
The governor of People's Bank of China Yi Gang said in an interview with the China Securities Journal, posted on the website, that China will keep the exchange rate of yuan at a reasonable level and continually deepen the market-oriented exchange rate reform, as the country's financial risks are largely controllable under a sound economic outlook.
The country's managed floating exchange rate regime is unchanged, and "we must stick to it", Yi said. He said that the bank is closely watching the foreign exchange market's fluctuations due to a strengthening dollar and external uncertainties.
The State Council said in a statement on Tuesday that Vice-Premier Liu He heads its newly seated Financial Stability and Development Committee.
The first meeting of the Committee was held on Monday and reviewed the country's three-year action plan to prevent and resolve major risks.
It also studied key tasks, including pushing financial reform and opening-up, maintaining a prudent and neutral monetary policy, keeping financial market liquidity "reasonably ample", and effectively managing the pace and intensity of financial regulation.
Pan Gongsheng, director of the State Administration of Foreign Exchange and a central bank deputy governor, stressed at a forum in Hong Kong on Tuesday that China is "confident in maintaining the renminbi basically stable" at a reasonable level.
The central bank official's comments, analysts said, helped quell concerns and stabilize market sentiment as both onshore and offshore traded yuan strengthened after their remarks were reported. In the first quarter, the yuan strengthened rapidly, followed by a turnaround beginning in mid-April. It sharply depreciated by 3.3 percent in June, the largest monthly drop ever.
It is highly unlikely that China is using yuan depreciation as a tool in trade negotiation with the US, said Tai Hui, chief market strategiest of J.P. Morgan Assest Management (Asia Pacific).
The yuan's weakening has reflected the narrowing spreads between interest rates of China and the US, and an overly depreciated yuan will bring no benefit, Tai said. (Chinadaily.com)