China central bank deputy says yuan to be broadly stable: People's Daily
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SHANGHAI (Reuters) - There is no basis for continuous depreciation of China's yuan currency, and the exchange rate will remain broadly stable, the deputy governor of China's central bank said in a newspaper editorial on Tuesday.
The comments by Yi Gang in the People's Daily, the official paper of China's ruling Communist Party, came after a two-week slide in the yuan that shaved off more than 1.5 percent of its value against the dollar.
They echoed repeated statements by other top policymakers over the past year as the yuan has weakened substantially against the dollar.
"The Chinese currency has stayed stable against a basket of currencies. The yuan was less volatile than major reserve currencies, and its volatility was far below other emerging market currencies," Yi said.
On Monday, the yuan hit a fresh six year low against the dollar, drawing large dollar sales by state banks, which some traders suspected was being carried out on behalf of the central bank to support the currency.
The yuan's fall has been exacerbated by global uncertainties such as Britain's exit from the European Union, which battered most emerging currencies, but recent weakness has revived memories of China's surprise devaluation last August and another rapid depreciation early this year.
Those declines in the yuan spread turmoil in global financial markets as investors fretted about deepening economic woes as growth slipped to a quarter-century low.
Even before Brexit, most market watchers polled by Reuters had already expected Beijing would allow the yuan to weaken modestly this year as the economy continues to slow.
China Foreign Exchange Trade System data showed on Monday that the index for the yuan's value based on the market's trade-weighted basket stood at 94.30 on Friday, down 0.4 percent from the previous week.
Market confidence in the likelihood of a U.S. interest rate rise in December has also pressured the yuan with a recent Reuters poll showing the largest bearish positions in the currency since late July.
Yi said two-way volatility of the exchange rate against the dollar had increased over time.
Separately, Yi also said that China would maintain its prudent monetary policy while keeping ample liquidity in the financial system.
The government would strengthen its credit policy to support small and medium-sized enterprises, he said in the editorial.
(Reporting By Nathaniel Taplin and Winni Zhou; Editing by John Ruwitch & Shri Navaratnam)
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