Wider RMB fluctuations unavoidable: central bank paper

June 20, 2016

RMB flucatuations unavoidable

The Financial News, a paper administered by the People’s Bank of China, ran a commentary Monday, saying wider two-way fluctuations in the yuan’s exchange rate are unavoidable.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he central bank has relaxed exchange rate controls and the yuan has inevitably grown more volatile as an increasing number of countries and regions are using and holding the currency following its inclusion into the IMF’s SDR basket, said the article.

The central parity rate of the yuan against the U.S. dollar fell by 210 basis points from the previous day to 6.6001 on June 15, the first time in five years the rate has dipped below 6.6.

However, the downward trend was reversed on the second day with a 262-basis point increase, the sharpest daily hike in more than three months.

The central bank has stressed that it will stick to market-oriented reforms and increase the yuan’s exchange rate flexibility, according to the commentary “Understand the yuan’s fluctuations.”

“What needs to be avoided is not fluctuations but possible risks caused by them,” said the article, adding that while risks do exist, there is no basis for long-term depreciation of the yuan.