MNI BRIEF: PBOC Pledges To Safeguard A Stable Yuan
The People’s Bank of China pledged to ensure the stability of the yuan exchange rate as the currency slumped to its weakest level since 2007 against the U.S dollar.
According to a statement following a meeting held by the National Foreign Exchange Market Self-regulation Mechanism published on the Bank’s website on Monday, the financial regulator “has the ability, confidence, and conditions to maintain the basic stability of the yuan exchange rate”, and the PBOC will “take action when necessary” to correct any one-way and pro-cyclical transactions and “firmly guard against the risk of exchange-rate overshot.”
The yuan has remained stable against a basket of currencies and kept strong against non-U.S.dollar major currencies, the meeting's statement noted, pointing to some positive factors which could shore up CNY in the future, including implementation of supportive policies, consumer prices (CPI) bottoming out, better-than-expected import and export data, among others.
Offshore yuan (CNH) surged by 700pips to CNH7.28 against the green back after the statement published and Aug’s money supply showed stronger-than-expected credit demand.