The yuan will be maintained at a “roughly” stable level, a level that is “balanced” and “reasonable”, he said.
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Emerging market currencies including the Indonesian rupiah, Philippine peso and South Korean won rose slightly against the dollar after China Thursday trimmed its yuan reference rate 1.1 percent.
Shock waves from the devaluation had spread through financial markets, causing stocks and Asian currencies to tumble.
But an afternoon comeback on Wall Street, led by Apple and energy stocks, and news China´s central bank had intervened to stop the yuan tanking on Wednesday cheered dealers.
“It is very possible that we could see a 10 to 15 percent drop in the exchange rate against the U.S. dollar in the next week or two”, said Duncan Innes-Ker of The Economist Intelligence Unit in a research note. Wednesday, the currency dropped again, prompting China to step in to contain its selloff.
The bank also announced that it would intensify monitoring of “abnormal” cross border flows.
“But the administration has no economic basis for criticizing China’s move”, said Prasad. The Standard & Poor’s 500 rose less than 0.1 percent to 2,086.05. That prompted suggestions Vietnam might be trying to help its exporters compete with Chinese goods. Investors are concerned that further softness in the Chinese yuan would accelerate the momentum. Instead, it links the yuan’s value to a basket of currencies. That meant the yuan rose with the dollar over the past year, hurting Chinese exporters and raising the threat of politically risky job losses.
Lower Treasury yields are confounding many investors and analysts who had expected the 10-year yield to rise toward 3%. On Tuesday, the central bank set the target 1.9 percent below Monday’s – the biggest one-day change in a decade.
Each day, the People’s Bank of China sets a target for the yuan, then lets the currency trade 2 percent above or below that level.
Many economists said the decline was too small to help Chinese exports due to weak global demand.
The threat that a cheaper yuan poses to exports and economic growth in other countries. On Wednesday, Vietnam allowed its currency to weaken in response to China’s move. Initiatives by Japan and the European Union over the past two years depressed the yen and euro by wider margins than this week’s decline in the yuan.
Growing doubts that the Federal Reserve will hike interest rates in September had knocked the greenback lower on Wednesday. The Fed has kept the rate at zero since December 2008.
The International Monetary Fund staff recommended last week that China wait until at least October 2016 to join.
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“Focusing on the Aussie dollar, it’s dropping, on concern about what China’s official attitude is”, said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
