‘Do not bet,’ says China’s central bank, regarding yuan speculation

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Last Updated on September 29, 2022 by Bitfinsider

Following the yuan’s rapid decline against the US dollar this week, the People’s Bank of China has warned against betting on it.

“Do not bet on a one-sided appreciation or depreciation of the renminbi exchange rate,” the central bank said late Wednesday.

This is based on a transcript of Vice Governor Liu Guoqiang’s speech at a video conference meeting on foreign exchange that day.

The renminbi, or yuan, surpassed the 7.2 level against the US dollar on Wednesday, falling to its lowest level since 2008. As the US Federal Reserve aggressively raised interest rates this year, the US dollar index, which tracks the dollar against major global currencies, reached two-decade highs.

The PBOC’s statement, with its requirement for banks to maintain foreign exchange market stability, is “verbal guidance against the currency’s recent rapid depreciation,” Goldman Sachs analyst Maggie Wei and a team wrote in a note.

However, the yuan’s breach of the 7.2 level “suggests Chinese policymakers are not necessarily defending a specific level of the exchange rate,” according to the report. The “PBOC statement may slow the pace of CNY depreciation on the margin.”

According to Wind Information, the onshore-traded yuan has fallen 1.9% against the dollar this week.

This month, the Chinese central bank has made additional moves to support the yuan, including lowering the amount of foreign currency that banks must hold.

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