MNI BRIEF:Yuan Stability Has Solid Foundation - PBOC Newspaper

Continuous economic recovery fueled by the People’s Bank of China’s counter-cyclical measures and better leveraged aggregate and structural monetary tools will further support yuan stability, according to a commentary published on the PBOC-run newspaper Financial News on Wednesday.

Despite a stronger U.S. dollar since the second half of August, the yuan has stayed within a narrow range of about CNY7.3 against the U.S. dollar, outperforming other major currencies. The depreciation pressure on CNY will likely ease as the interest spread between China and the U.S. gradually returns to the normal range, should the Federal Reserve end interest rate hikes in line with market expectations.

The PBOC has shown its determination to prevent overshooting risk and guide market expectations mainly by lowering the FX deposit reserve ratio and issuing additional central bank bills in Hong Kong in recent months, the paper noted. The improved financing environment also provides strong support, with new medium- and long-term loans to corporates and residents rising significantly in September.