2014-03-15

PBOC Spokesman: Depreciation of Yuan and Widened Trading Band Have No Relationship; No Reason For Yuan to Appreciate or Depreciate

The spokesman who announced today's widening of the trading band said there was no relationship with the recent depreciation, goal is a floating yuan, economy requires greater exchange rate flexibility.

央行:未来基本退出常态式外汇干预
China's central bank announced on the 15th, the RMB against the U.S. dollar exchange rate floating range expanded to 2%.

This is the first time in nearly two years China announced the expansion of the floating exchange rate margin. April 14, 2012, China's central bank announced the foreign exchange market, the floating range of the RMB against the U.S. dollar from the original extended to five thousandths of one percent.

China's central bank spokesman on the 15th on the expansion of the RMB exchange rate floating range of answering reporters' questions, said the exchange rate as an important element of the market price, is one of the efficient allocation of domestic and international resources, the decisive factor, and expand the floating range of the RMB exchange rate is conducive to enhance the RMB exchange rate fluctuations flexibility to optimize the efficiency of capital allocation, market allocation of resources to further enhance the decisive role in accelerating the transformation of economic development mode and structural adjustment.

The spokesman said that in recent years, the development of China's foreign exchange market to mature, trading volume continued to grow, increasing variety of transactions, trading body gradually increase the ability to control risk, the increasing willingness of independent pricing, but also the need for greater volatility range to accommodate the further development of the foreign exchange market.

Again widened gradual reform

Commenting on the floating range of 2% How to determine when, the spokesman said that the RMB exchange rate formation mechanism reform follows the initiative, controllability and gradual manner. From the reform process, the RMB exchange rate floating range is gradually expanding. 1994 RMB exchange rate floating range of 0.3% to 0.5% in 2007 to expand, in 2012 expanded to 1%, up to now this has been a floating range of 2 years or so, the magnitude of the expansion is a progressive reform arrangements again is secure. At the same time, greater exchange rate floating range of fully consider the ability to adapt to economic entities, step by step forward, the adjustment of various types of market players in the affordable range. Overall, this will be the floating range of the RMB against the U.S. dollar widened to 2% is appropriate, the risk is relatively small.

Expand the floating range of RMB depreciate no direct relationship

Bank of specially stressed that the people of exchange rate floating range is expanding institutional arrangements to enhance two-way floating RMB exchange rate flexibility, and depreciate the RMB exchange rate is not directly related.

Central bank spokesman said in 2013 the surplus to GDP ratio in China has dropped to 2.1% in the current account balance of payments tends to balance the sharp appreciation of the RMB exchange rate basis does not exist. Meanwhile, China's fiscal financial risk control, ample foreign exchange reserves, a strong ability to withstand external shocks, there was no basis for the RMB exchange rate devaluation of.

"Two-way floating RMB exchange rate appreciation and depreciation of the means in the short term can not simply be attributed to a trend, the trend should be more concerned about the medium and long term. With the exchange rate market to promote the formation mechanism reform, the future of the RMB will be the same with the major international currencies , there is sufficient flexibility in the way volatility will be the norm. market participants to exchange rate fluctuations parties should be a rational view, a positive response, of course, if exchange rates fluctuate significantly abnormal, the People's Bank will implement the necessary regulation and management in order to maintain the RMB exchange rate normal floating. "central bank spokesman said.

Central Bank: Foreign intervention basically out of the norm in the future

China's central bank said that the future reform of the RMB exchange rate formation mechanism will continue to move towards market-oriented, market-determined exchange rate of increase efforts to promote international balance of payments. Development of the foreign exchange market, abundant foreign exchange products, expand the breadth and depth of the foreign exchange market to better meet the needs of businesses and residents. According to the foreign exchange market development conditions and economic and financial situation, and enhance two-way floating RMB exchange rate flexibility, and keep the RMB exchange rate basically stable at a reasonable and balanced level. Further the role of market exchange rates, the central bank foreign exchange intervention basically out of the norm, and establish a market-based, managed floating exchange rate system.
Depreciation is coming if they cannot get a handle on the debt problems because those reserves will begin draining.

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