China Vows to Keep Yuan Stable Amid Efforts to Support Trade

(Bloomberg) -- China pledged to keep the yuan basically steady as it seeks to offer policy support for both imports and exports.

Rapid growth in the nation’s trade, which has made a “major contribution” to the economic recovery, will face more uncertainty and imbalances, the official Xinhua News Agency reported, citing a State Council meeting chaired by Premier Li Keqiang. To offer support, the authorities will ensure stability in the yuan and help corporates manage foreign-exchange risks, according to Xinhua.

The yuan jumped to the strongest level since 2015 versus the currencies of its trading partners this month, extending a rally that threatens to dent the competitiveness of Chinese exports. The currency has strengthened 2.5% versus the dollar this year to become Asia’s top performer, as it benefits from inflows into both the current and capital accounts.

The authorities have already signaled they are uncomfortable with the currency’s gains. The central bank asked lenders this month to keep more foreign exchange in reserve, and it also set a string of weaker-than-expected fixings in an effort to deter any speculative bets. 

The yuan’s fixing on Thursday was lower than the average estimate in a Bloomberg survey for a 14th straight day. If the PBOC sets a reference rate weaker than expected again on Friday, that would be the longest stretch ever based on data compiled by Bloomberg since 2018. 

Banks are being encouraged to conduct trading of foreign-exchange forwards in a targeted manner, according to Xinhua. No details were given on how China intends to stabilize the yuan. 

The onshore yuan was little changed at 6.3703 per dollar as of 5:21 p.m. in Beijing.

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With assistance from Bloomberg