Yuan's two-way fluctuation the norm: official

BEIJING -- Two-way movements will be a normal condition for the value of the Chinese currency renminbi, also known as the yuan, a monetary official said on Tuesday.

In the Shanghai Securities News, Guan Tao, head of the balance of payment department under the State Administration of Foreign Exchange, said, "It is normal for the yuan to either appreciate or depreciate."

The yuan's value has come under the spotlight as its exchange rate against the US dollar declined about 3.5 percent in the first four months of the year, a period in which the country also saw a shrinking trade surplus.

Guan said the depreciation was normal. "In the history of international finance, no matter what currency exchange rate regime is adopted, there has never been a currency only rising and never declining," he said.

From the launch of the yuan's exchange rate reform in 2005 to the end of last year, the currency has appreciated by 36 percent against the US dollar, resulting in the yuan's nominal and real "effective" exchange rate rising 32 and 42 percent respectively, according to Guan.

It is the yuan's continuous one-way appreciation during the past two decades which has created a perception that the yuan would keep appreciating in the long run, he added.

The official put the yuan's recent depreciation in the wider context of China's reform of its currency's exchange rate formation mechanism, which aims to "keep the renminbi exchange rate basically stable at an appropriate, balanced level and expand its floating range."

Guan said changes in the value of the yuan was "understandable".

More signs of an economic slowdown, weak export and import figures, and news about credit default cases in China in addition to the accelerated pace of a quantitative easing exit in the United States have all contributed to the increased fluctuations in the value of the renminbi, he said.

The official expected the yuan's two-way fluctuations to be a new normalcy in the future and the currency's exchange rate to be more "flexible".

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