By Ma Jun Source: Xinhua Published: 2016-1-11
BEIJING -- The Chinese yuan`s exchange rate will be determined with more reference to a basket of currencies, as it faces persistent depreciation pressure against the US dollar, according to a senior economist with the central bank on Monday.
"Giving more consideration to a basket of currencies means the RMB`s value will be kept basically stable against the whole basket," said Ma Jun, chief economist of the People`s Bank of China`s research bureau.
"That will be the keynote of the yuan`s exchange rate formation mechanism in the foreseeable future," he said.
China will guide the market to form a yuan/dollar rate, so as to help stabilize the yuan`s value against the currency basket, said Ma.
"The central bank will ask market makers to consider the yuan`s stability against the currency basket when reporting their central parity quotes to the China Foreign Exchange Trade System," he said.
The yuan`s value will be increasingly stable against the currency basket, while the yuan/dollar rate will fluctuate wider in a two-way manner, rather than in a single direction, Ma predicted.
When investors understand the basket-based exchange rate formation mechanism, short selling of the yuan will decline, according to him.
"The yuan`s exchange rate is currently not pegged to the US dollar nor is it allowed to float in an unchecked way," he said.
"We will introduce a mechanism to properly limit daily yuan/dollar rate fluctuation," said Ma.
Giving stronger consideration to a basket of currencies will not hurt the Chinese government`s autonomy in making monetary policies, he said, adding that the yuan`s rate will not be strictly pegged to the basket.
Ma`s remarks came after the Chinese yuan, under persistent depreciation pressure, dipped to a five-year low against the greenback last week.
The author is the chief economist of the People`s Bank of China`s research bureau.