PBOC ‘Confident’ Yuan Can Stay Stable, According to Governor’s Remarks

(Bloomberg) -- People’s Bank of China’s Governor Yi Gang said he’s “confident” the yuan will stay basically stable at a reasonable and equilibrium level, as many factors favor a stable currency.

The yield spread between U.S. and Chinese 10-year sovereign bonds was “still in a relatively comfortable range” and the case for the Federal Reserve to raise interest rates was smaller, Yi said on May 18, according to an article published Tuesday by China’s Securities Journal. Both of these are favorable to keeping the yuan stable, Yi said at a meeting held that day.

Yi’s comments on the yuan are similar to recent remarks from Guo Shuqing, the country’s top banking regulator and the PBOC’s party secretary. Over the weekend he warned speculators that shorting the yuan could lead to huge losses and later said that the economy’s fundamentals mean that it won’t depreciate in the long term.

China’s current benchmark interest rates for loans and deposits were appropriate, Yi said, adding that as part of the process of making prices more market driven, the bank could study stopping the release of lending rates. China has kept its benchmark rates unchanged in recent years and repeatedly said it aims to complete the last mile in long-standing reform to make interest rates more market-oriented.

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger, Sharon Chen

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With assistance from Bloomberg