The People's Bank of China tolerates declining yuan value. (Photo : Getty Images)
China’s currency has just recorded its lowest value since 2010 and the country decided to tolerate the decline in order to prevent capital outflows and criticisms from trade partners and investors.
In an exclusive report from Reuters, an anonymous policy expert revealed that the People's Bank of China will be ensuring that any further drop in the yuan is gradual and "under control."
This statement comes just days after reports revealed how the yuan is at its lowest point since the record decline in 2010.
Tolerance
According Reuters's source, the decline was expected especially after the historical Brexit vote and may affect China's yuan for a significant period of time.
"The Brexit vote was a big shock. The market volatility may last for some time," the source stated.
The insider who refused to be named because of the issue's sensitivity explained that the Chinese central bank will be tolerating the decline so long as it is within the expected range.
"The central bank is willing to see yuan depreciation, as long as depreciation expectations are under control," the source said.
According to Reuters, the central bank is willing to tolerate further depreciation of the yuan to about 6.7 to 6.8 per dollar.
Earlier this week, Bloomberg reported how China decided to intervene with the offshore yuan market in order to prevent any further fall of the currency.
"The People's Bank of China does not want to see the offshore yuan depreciating too fast," Bank of East Asia Ltd. foreign-exchange analyst Kenix Lai told the outlet. "The economic downside continues in the second half, putting depreciation pressure on the yuan, while the fallout from Brexit will affect Chinese exports."
Pressure
However, there are people who criticized the country's "manipulation" of the yuan like presumptive U.S. Republican Presidential nominee Donald Trump.
On Wednesday, Trump declared that once elected, he will immediately label China as a "currency manipulator."
According to Reuters, his statement was based on some currency traders' belief that some Chinese government-owned banks intervened in the currency's decline by selling dollars to as low as 2.4 percent this 2016.
However, the PBoC strongly denied the allegations, saying that the media circulate "inaccurate information" on the issue. The central bank made no mention of what outlet it is referring to, but Reuters said it had previously reported on the matter.
Meanwhile, an official from the Ministry of Commerce said that China should allow other factors to weigh in so as to safeguard the country's economy.
