China to curb ‘disruption’ in currency market, says central bank

BEIJING, China  -China’s central bank said on Monday it would crack down on speculation that distorts the value of the yuan as the country’s currency sees persistent volatility.

The onshore yuan, whose trade is regulated by Beijing, last week briefly hit its lowest level against the US dollar in almost 16 years.

The unit has come under pressure as the People’s Bank of China lowers interest rates in a bid to kickstart the world’s number two economy, at the same time as the Federal Reserve has tightened policy to temper inflation.

The PBoC said in a statement Monday that it had convened a “special meeting” to discuss “the recent situation in the foreign exchange market and issues around the exchange rate of the renminbi”, the official name for the yuan.

“The financial management authorities have the capacity, confidence and resources to maintain the stability of the renminbi exchange rate and take action when necessary,” the central bank said.

“They are determined to correct unilateral and pro-cyclical behaviors, deal with disruption to the market order, and guard against the risk of overshooting the exchange rate,” it said.

The bank added that “although the renminbi has recently somewhat depreciated against the US dollar, it remains basically stable against a basket of currencies”.

The onshore yuan strengthened to 7.2766 against the dollar Monday from 7.3503 on Friday.