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China’s central bank: Talk of 10% yuan devaluation is ‘nonsense’

People’s Bank of China defends its handling of yuan’s plunge


Chinese central bank officials on Thursday offered a rare public defense after their unexpected move this week to devalue the yuan, saying the currency will stabilize and eventually resume its climb.

At a news conference in Beijing on Thursday, People’s Bank of China Vice Gov. Yi Gang said China has the financial firepower to defend the currency as needed. But officials also said the yuan’s underpinning remains firm and that its value should strengthen, and dismissed the idea that the move was made to help the country’s sputtering exports sector.

They also said the move — made through a mechanism that they said was intended to give markets more say in how the yuan was valued — gives the central bank more room to maneuver at a time when the U.S. dollar is appreciating against most other currencies.

The comments come after the PBOC’s yuan moves roiled markets, spurred selling of the currency and sparked criticism from politicians in the U.S. and elsewhere.

On Thursday, traders pushed the yuan down as much as 0.9% from its previous close to 6.4470 against the U.S. dollar. After holding steady in the early afternoon, the yuan gradually began to weaken again, as investors assess Beijing’s latest commentary. By comparison, the yuan was valued at 6.2097 at the close of trading on Monday, the day before the PBOC first devalued the currency, meaning the currency has fallen more than 3% versus the dollar since then. The yuan last traded at 6.4178 against the U.S. dollar.

The news conference was an unusual event for an organization that rarely puts a public face forward and typically communicates through lengthy messages on its website, sometimes posted well into the evening. Foreign reporters as well as state-controlled media were invited. It marks a rare public stepping out for Yi, the PBOC’s No. 2 official and the one responsible for day-to-day oversight of foreign exchange.

Yi described as “nonsense” a report that the PBOC wants to engineer an eventual 10% depreciation of the currency in an effort to help exporters, who play a significant role in the economy but have been suffering from sluggish global demand as well as a stronger currency. He also said China would continue on its own schedule to open the country up to freer cross-border capital flows despite recent market fluctuations.

The Wall Street Journal reported on Wednesday that the PBOC intervened in the foreign-exchange market late that day to defend the currency. Asked about that move, Yi said the PBOC had stopped “regularly” intervening in the market to control the yuan’s value, but he said the central bank has adopted a “managed floating-rate regime” and would intervene during “external shocks.”

An expanded version of this report appears on WSJ.com