The Chinese central bank said on Wednesday that stabilizing the foreign exchange market is its top priority, after the yuan weakened to its lowest level since the 2008 global financial crisis.
The statements by the People’s Bank of China (PBOC) came at a time when a tightly controlled currency like the yuan continued to weaken against the dollar, falling 0.9% on the day and lifting its year-to-date losses to more than 12 %. In its foreign operations, the Asian currency reached an all-time low.
The PBOC said the foreign exchange market works largely in an orderly fashion, but warned against making big one-way bets on the currency. He also reiterated that the yuan has a solid base to be stable.
“The foreign exchange market is of great importance and maintaining stability is the top priority,” the PBOC stressed.
Market participants often see these official comments as a sign that authorities are becoming increasingly uncomfortable with the currency’s rapid moves.
The PBOC also urged members of the China Foreign Exchange Self-Regulatory Framework, which serves as a market self-regulatory and coordination mechanism, to avoid sharp fluctuations in the currency.
He added that relevant departments should strengthen expectations management to prevent speculative trading.
“Keep in mind that exchange rates can never be predicted exactly, and two-way fluctuation is the norm,” the PBOC said. “You don’t have to make one-way bets on currency appreciation or depreciation. You will definitely lose if you keep betting.”
