China will guard against yuan overshooting risks

BEIJING (Reuters) – China will resolutely guard against overshooting risks of the yuan exchange rate, People’s Bank of China (PBOC) Governor Pan Gongsheng said, according to a report on Wednesday by Financial News, a newspaper owned by the PBOC.

The comments come as the has lost more than 5% so far this year to become one of the worst performing Asian currencies, in light of the widening yield differentials with other major economies and an uneven domestic economic recovery.

China will prevent the formation of one-sided and self-reinforced market expectations in the Chinese yuan, Pan said at a financial forum in Beijing.

Despite losses against the greenback, Pan said the yuan’s value against a basket of currencies was largely stable, while the yuan appreciated slightly versus other non-dollar currencies.

The yuan’s trade-weighted CFETS yuan basket index stood at 98.49 on Wednesday, down 0.18% year-to-date, according to Reuters calculation based on official data.

Pan also reiterated that China is capable of maintaining the prudent operations of the foreign exchange market and the yuan will be basically stable, reasonable and balanced.