PBOC rules out one-way renminbi movements

Vice-governor of China's central bank said the country is capable of keeping renminbi generally stable and ruled out the possibility of one-way movements dominating the renminbi exchange rate.

Liu Guoqiang, vice-governor of the People's Bank of China, said at a news conference on Monday that the long-term trend of the exchange rate of renminbi should be clear, as the world's recognition of the currency will continue to increase.

However, two-way fluctuations should be a kind of normalcy in the short term, Liu said, ruling out the possibility of one-way movements dominating the renminbi exchange rate and urging market participants to avoid betting on a specific level of the exchange rate.

"A reasonably balanced and generally stable renminbi is what we are happy to see, and we have the capacity to support it. I don't think there will be any accidents, nor will there be allowed to be any accidents," Liu said.

As of 16:30 on Monday, the onshore exchange rate of renminbi against the dollar came in at 6.9366, weakening by 338 basis points from Friday's close, marking it the lowest it has been in about two years, according to market tracker Wind Info.

Shortly after Liu's remarks, the PBOC announced on Monday that it would reduce the foreign exchange reserve requirement ratio by 2 percent to 6 percent on September 15, a move experts said will help alleviate the depreciation pressure of renminbi.

Despite the depreciation against the dollar, due to monetary tightening in the United States, renminbi has increased against all the other currencies in the Special Drawing Rights basket this year, Liu said.

With this, China's foreign exchange market has performed within a normal range, had orderly cross-border flows of capital, and witnessed controllable spillover effects of the US tightening, Liu said.