No basis for further depreciation: China's central bank

The People's Bank of China said that the country's strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provide "strong support" to the exchange rate.
The People's Bank of China said that the country's strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provide "strong support" to the exchange rate. PHOTO: EPA

SHANGHAI (Reuters) - China's central bank said on Thursday that there is no basis for further depreciation in the yuan currency given strong economic fundamentals, in a bid to reassure jittery global financial markets after it devalued the currency earlier in the week.

The People's Bank of China (PBOC) said that the country's strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provide"strong support" to the exchange rate.

The PBOC also said that it will monitor "abnormal" cross border flows.

China's yuan fell for a third day on Thursday, after the PBOC shocked markets by pushing its official guidance rate down 2 per cent on Tuesday, the sharpest adjustment in the history of China's foreign exchange market.

The PBOC said at the time that the move was a one-off depreciation, but sources involved in the Chinese policy-making process told Reuters that powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 per cent.