Yuan stable in February, more flexible in future

BEIJING - The Chinese yuan remained stable against a basket of currencies in February and more flexibility will be seen in its exchange rate, a central bank affiliate said Wednesday.

The yuan exchange rate composite index, which measures the yuan's strength relative to a basket of 24 currencies including the US dollar, euro and Japanese yen, fell 0.4 percent to 93.84 at the end of February from a month earlier, according to the China Foreign Exchange Trade System (CFETS).

The depreciation was milder than the 0.64-percent decrease in the index in January.

In February, the index that measures the yuan against the Bank for International Settlements currency basket dropped 0.48 percent to 95.1, while against the Special Drawing Rights basket it strengthened 0.46 percent to 95.79.

With only minor changes in the three indices, the yuan was basically stable against a basket of currencies last month, the CFETS said in an article.

The Chinese currency also held steady against the US dollar, though it was under depreciation pressure due to stronger expectations for US economic recovery and interest rate hikes.

The yuan's market rate against the dollar strengthened 0.13 percent in February, despite a 0.24-percent weakening in the currency's central parity rate against the dollar, according to the CFETS.

"There has been a divergence in market opinions about the yuan's trend since February," it said, citing improved Chinese economic data, increased flexibility in the yuan's movement and reduced expectations for the yuan's depreciation.

The CFETS noted that the yuan's exchange rate will become more flexible in the future in line with the international market movements as well as currency supply and demand.

The sound fundamentals and positive changes of China's economy will continue to keep the yuan basically stable at a reasonable and balanced level, the CFETS said, while warning of uncertainties from the US policies and unforeseeable political or economic events.