MNI BRIEF: PBOC To Curb Any Fast Yuan Depreciation-Advisor
Steps could include action in the offshore market.
The People’s Bank of China is expected to curb any rapid weakness of the yuan and the currency would swing in a wide range of 6.7 to 7.0 against the dollar, said Zhang Ming, senior fellow of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, in his latest commentary piece on the yuan.
The central bank may take action in the offshore market, restart the use of the counter-cyclical factor in its CNY fixing formula and lift the FX risk reserve ratio for forward forex trading, he said, noting a sharp depreciation of the yuan could fuel market sentiment and worsen capital outflows. CNY eased a high of 6.7826 on Tuesday, from a recent high level of CNY6.8150 hit last week. CNH hit a high of 6.7999 on Tuesday.
The chance for the yuan to break the level of 7.0 against the dollar however remains small this year as China's economy is expected to rebound in the second half on ongoing stimulus policies, he said.