PBOC to deepen reform on foreign exchange market

While excluding the possibility of a one-sided performance of the renminbi exchange rate, the People's Bank of China will make continued efforts to deepen reform in the foreign exchange market and refrain from drastic ups and downs in the Chinese currency, the country's central bank said in an article released on Tuesday.

The PBOC emphasized that the exact renminbi exchange rate cannot be precisely predicted under the market-based foreign exchange formation mechanism. The two-way volatility of the Chinese currency is thus normal while a "one-sided" performance will not occur.

Although renminbi has depreciated against the US dollar recently, its deprecation is much smaller than the appreciation of the US dollar index during the same period. Besides, renminbi has significantly appreciated against the euro, British pound, and Japanese yen recently, making the Chinese yuan one of the stronger currencies in the world at present, said the PBOC.

Ever since the foreign exchange reform in 2005, the annual volatility rate of renminbi has remained between 3 and 4 percent. The renminbi exchange rate has quickly adjusted among multiple challenges such as the trade friction between the United States and China, COVID-19 pandemic, world economic slowdown, global inflation and monetary tightening in developed economies. Renminbi has shown stronger elasticity, effectively offsetting various impacts, said the PBOC.

Renminbi's long-term trend is definite, as the world will show rising recognition over the Chinese currency. Renminbi assets are safe, it added.

The PBOC will stick to normal monetary policies given the adequate policy room and rich reserve of tools. Policies will be implemented comprehensively to stabilize market expectations and keep renminbi's exchange rate reasonably stable, said the Chinese central bank.