BEIJING — Following the yuan’s sharp slide this week versus the dollar, the People’s Bank of China has issued a warning against betting on it.
According to a CNBC translation of a central bank statement posted in Chinese on its website late Wednesday, “do not bet on a one-sided appreciation or depreciation of the renminbi exchange rate.”
That is based on a summary of the vice governor Liu Guoqiang’s speech during a video conference meeting on foreign exchange that day.
The renminbi, or yuan, fell to its lowest level since 2008 on Wednesday after crossing the 7.2 mark versus the US dollar. As the U.S. Federal Reserve quickly hiked interest rates this year, the U.S. dollar index, which measures the value of the dollar against a basket of key world currencies, rose to two-decade highs.
According to Goldman Sachs analyst Maggie Wei and a team, the PBOC’s statement, which calls for banks to maintain stability in the foreign exchange market, is “verbal guidance against the recent fast depreciation of the RMB.”
Nevertheless, the report stated that the yuan’s crossing of the 7.2 threshold “suggests Chinese policymakers are not necessarily defending a particular level of the currency rate.” The PBOC’s remark “could moderate the margin depreciation of the CNY.”
According to Wind Information, the onshore-traded yuan has declined 1.9% against the dollar so far this week.
This month, the Chinese central bank has taken other actions to boost the yuan, such as lowering the minimum amount of foreign currency that banks must keep.