China says stabilising FX market is top priority, warns against ‘gambling’
China’s central bank said on Wednesday that stabilising the foreign exchange market is the top priority, after the yuan weakened to its lowest level since the global financial crisis of 2008.
The remarks from the People’s Bank of China (PBOC) came as the tightly-managed yuan continued to weaken against the surging U.S. dollar, falling 0.9% on the day and taking its losses so far this year to over 12%. In offshore trade, the yuan hit a record low.
The PBOC said the FX market was largely operating in an orderly manner, but warned against making heavy one-way bets on the currency. It reiterated that the yuan has a solid basis to be basically stable.
“The foreign exchange market is of great importance, and maintaining stability is the top priority,” the PBOC stressed.
Market participants usually view such official remarks as a sign that authorities are growing uncomfortable with rapid currency movements.
The PBOC also urged members of the China FX Market Self-Regulatory Framework, which serves as a market self-regulatory and coordinating mechanism, to prevent sharp fluctuations in the currency.
It added that relevant departments should strengthen expectation management to prevent speculative trading.
“One must realize, that exchange rates can never be predicted precisely, and two-way fluctuation is the norm,” the PBOC said.
“Do not make one-way bet on currency appreciation or depreciation. You will definitely lose if you keep gambling.”