PBoC’s Deputy Governor Yi also said there was “no basis for a persistent weakening in the yuan, that it was a strong currency in the longer term, and that the aim of the PBoC is to have the market determine the exchange rate“, according to Barclays.
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On Tuesday, the People’s Bank of China (PBOC) shocked global markets by guiding its daily midpoint setting down almost 2 percent, the sharpest such adjustment in China’s modern foreign exchange market.
Earlier this week, China allowed the yuan to fall by 1.9 percent against the U.S. dollar, marking the biggest slide in a decade.
After letting the currency float against the dollar on Tuesday, the yuan tumbled nearly 2%, with a similar drop on Wednesday. The current-account surplus narrowed to 7.6 billion ringgit ($1.9 billion) from 10 billion ringgit, but beat the forecast 6.1 billion ringgit. Japan’s Nikkei shrugged off early losses and downbeat capital expenditure figures to end up 1% at 20,595.55.
The advance estimates of US retail and food services sales for July were $446.5 billion, an increase of 0.6 percent from the previous month, Xinhua quoted the Commerce department as saying on Thursday.
“From a long-term view, the renminbi remains a strong currency”, Zhang said, adding that “in the future, the renminbi will be back on the appreciation track”.
While a limited yuan devaluation shouldn’t greatly change the eurozone’s inflation outlook, S&P said, the reaction in emerging markets is critical. The PBoC fixes the value of the currency to the dollar every morning, and then allows it to trade within a 2 percent band.
Some warned of a looming currency war, others that China was abandoning its commitment to economic restructuring, but others suggested investors may have overreacted.
Nevertheless, the analyst said Russia’s central bank had originally planned to implement a similar policy of controlled devaluation, selling U.S. dollars to support the ruble if it reached the limits of the established currency corridor.
Global stock markets are steady on Thursday as the decline in China’s currency slowed and the country’s central bank eased fears of more steep drops.
China’s currency strategy has been seen as two pronged.
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“Overall, Germany and France have grown at a similar pace” during the first half of the year, said Dominic Bryant, an economist at BNP Paribas SA, in a note. “The sudden move on the part of China to devalue its currency yuan will have an adverse impact on India’s exports of textiles and clothing, which are facing already sluggish growth due to recessionary conditions in global markets”, Texprocil chairman R K Dalmia said in a statement here.
