A clerk counts cash at a bank in Taiyuan, capital of Shanxi province.[Photo/China News Service]
Yuan exchange rates will have a more stable foundation after the 19th National Congress of the Communist Party of China and the market will have a bigger role in determining the currency’s value, a top central bank official said on Oct 18.
The People’s Bank of China, the central bank, has almost withdrawn its “regular” intervention in the foreign exchange market, Pan Gongsheng, head of the State Administration of Foreign Exchange, said while attending the congress.
“We can also see that the exchange rate is more market-driven and has been more stable recently,” said Pan, who is also a deputy governor of the central bank.
The central bank released a report on its website on Oct 17 saying that the bank will continually facilitate the yuan’s internationalization to reflect a more stable position in the global monetary system.
The PBOC also expects yuan usage to rise so that it can play a more important role as a global reserve currency.
Wang Youxin, an analyst with Bank of China, said market expectations for depreciation of the yuan’s exchange rate have made a switch this year, as data show companies and private sector have greater appetite for settlement.
“China’s yuan has fully recovered from 2016 and has recouped from last year’s loss,” he said.
Demand for the yuan has risen in August, he said.
“Supported by the country’s improving economic data, the currency is expected to remain stable till the end of the year,” he said.
“Improved market expectations provide a favorable environment for pressing ahead with reform,” he added. “The general trend is to move toward a more market-based regime.”
It has been exactly a year since the International Monetary Fund included the yuan in its basket of five reserve currencies, in addition to the US dollar, the euro, the Japanese yen and the British pound.