BEIJING — The People’s Bank of China has warned against betting on the yuan, after its rapid decline against the U.S. dollar this week.
“Do not bet on a one-sided appreciation or deprecation of the renminbi exchange rate,” the central bank said in a Chinese statement on its website late Wednesday, according to a CNBC translation.
That’s based on a readout of a speech by vice governor Liu Guoqiang at a video conference meeting on foreign exchange that day.
The renminbi, or the yuan, crossed the 7.2 level against the greenback Wednesday, falling to its weakest since 2008. The U.S. dollar index, which tracks the dollar against major global currencies, has climbed to two-decade highs as the U.S. Federal Reserve aggressively raised interest rates this year.
The PBOC’s statement, with its requirement for banks to maintain stability in the foreign exchange market, is “verbal guidance against the recent rapid depreciation of the currency,” Goldman Sachs analyst Maggie Wei and a team said in a note.
However, the yuan’s crossing of the 7.2 mark “suggests Chinese policymakers are not necessarily defending a particular level of the exchange rate,” the report said. The “statement from the PBOC might slow the pace of CNY depreciation on the margin.”
The onshore-traded yuan has weakened against the dollar by 1.9% so far this week, according to Wind Information.
The Chinese central bank has made other moves to support the yuan this month, including reducing the amount of foreign currency banks need to hold.