‘Yuan bears will suffer heavy losses’

Yuan has lost more than 2.5% against the dollar


Reuters May 26, 2019
A Reuters file photo of Yuan and US dollar. PHOTO: REUTERS

BEIJING: China’s banking and insurance regulator said on Saturday it did not expect a persistent decline in the yuan and warned speculative short sellers they would suffer “heavy losses” if they bet against the currency.

The yuan has lost more than 2.5% against the dollar since the festering China-US trade dispute intensified earlier this month. It is now less than a tenth of a yuan away from the 7-per-dollar level authorities have in the past indicated as a floor.

“Short-term fluctuation of the yuan exchange rate is normal, but in the long-run, China’s economic fundamentals determine that the yuan will not depreciate persistently,” Xiao Yuanqi, the spokesperson for the China Banking and Insurance Regulatory Commission (CBIRC), told a finance forum in Beijing.

Sources have told Reuters China’s central bank will use foreign exchange intervention and monetary policy tools to stop the yuan weakening past the key 7-per-dollar level in the near-term.

A defence of the 7 level could help boost confidence in the currency and soothe investor fears about the yuan, even as souring trade relations with Washington make competitive devaluation a compelling option for Beijing.  

Published in The Express Tribune, May 26th, 2019.

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