Chinese regulators look to support the yuan as pressures on the currency mounts
May 21, 2019 (China Knowledge) - According to the State Administration of Foreign Exchange (SAFE), China has the fundamentals, confidence and ability to keep the country’s foreign exchange market stable as the escalating trade war renews pressure on the yuan, threatening to once again fall past 7.00 against the dollar.
The yuan has not fallen past 7.00 against the dollar since the 2008 global financial crisis under tight supervision from Chinese regulators, burning through USD 1 trillion of foreign exchange reserves to support the yuan during the 2015 to 2016 domestic stock market crash.
Last week, the People’s Bank of China (PBOC) released its first quarter monetary policy report, pledging to continue its deleveraging campaign while supporting the economy with prudent and flexible monetary policy.
The latest comments by SAFE highlight China’s determined stance towards keeping the yuan above 7.00 against the dollar to prevent any major outflows from the country which could damage the country’s economy and market confidence.
During trade negotiations, the US had asked for China to limit the yuan’s decline to prevent the impact of US tariffs from being fully offset and China will likely continue supporting the yuan as long as there remains a possibility of reaching a trade deal.
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