MNI BRIEF: PBOC Pledges To Curb Sharp Yuan Moves

The People’s Bank of China will take prompt actions to curb any overshoot of the yuan exchange rate, while enhancing support to the economy via expanding credit and reducing funding cost, a senior official of the Bank told reporters on Wednesday during a briefing.

The forex regulators have sufficient policy room and tools to “correct any one-way pro-cyclical moves” and “deal with transitions disrupting market order”, said Zou Lan, head of the PBOC's monetary policy department, noting the yuan has remained strong against major non-U.S dollar currencies since mid-July thanks to China’s economic recovery.

The Bank will prioritise the domestic economy and use a variety of policy facilities to keep liquidity ample, while stabilising credit growth with the help of state-owned big banks, he said, adding the PBOC will continue to guide lenders to lower interest rates on existing mortgages and lead lenders to support resolution of local government debt. “The PBOC will strike a balance between boosting the domestic economy and maintaining yuan exchange rate stability, ” he said