MNI BRIEF: Yuan To Remain Stable and Flexible - PBOC's Yi

China's yuan will see two-way volatility this year and the 7 level of the U.S. dollar-yuan pair is not a “psychological barrier”, said the PBOC governor Yi Gang in a briefing on Friday.

The central bank will ensure the yuan exchange rate is stable and flexible, he said. “The yuan will see moderate volatility this year, which benefits the economy,” said Yi, adding that currency stability is important given some countries were stuck in a middle-income trap due to the sharp depreciations of currencies. The flexibility of the yuan has improved in recent years, he said.

Pan Gongsheng, vice-governor of the PBOC, said the yuan will be supported by a widening of the growth rates between China and the U.S, the narrow interest spread between the two countries, the rising value of the yuan as an investment and save haven asset, and growing experience of forex market regulators.

Yuan internationalisation is facing a benign environment as the global currency system is further diversifying. The PBOC will improve cross-border financing and settlement, push growth of the offshore yuan market, promote mechanisms to aid yuan liquidity supply in the offshore market and the capacity of cross-border capital movement management, said Pan.