The Chinese yuan weakened past the closely watched 7.2 level against the dollar this week.
BEIJING — The People’s Bank of China has warned against betting on the yuan, following the sharp decline against the US dollar this week.
“Do not bet on a unilateral strengthening or weakening of the renminbi exchange rate,”[ads1]; the central bank said in a Chinese statement on its website late Wednesday, according to a CNBC translation.
It is based on a reading of a speech by Vice Governor Liu Guoqiang at a video conference meeting on currency that day.
The renminbi, or yuan, crossed the 7.2 level against the dollar on Wednesday, falling to its weakest since 2008. The U.S. dollar index, which tracks the greenback against major global currencies, has climbed to two-decade highs as the U.S. central bank has aggressively raised interest rates this year.
The PBOC’s statement, with the requirement for banks to maintain stability in the foreign exchange market, is “verbal guidance against the latest rapid depreciation of the currency,” Goldman Sachs analyst Maggie Wei and a team said in a note.
But the yuan’s crossing of the 7.2 mark “suggests that Chinese policymakers are not necessarily defending a particular level of the exchange rate,” the report said. “The PBOC statement may slow the pace of CNY depreciation on the margin.”
The domestically traded yuan has weakened against the dollar by 1.9% so far this week, according to Wind Information.
China’s central bank has made other moves to support the yuan this month, including reducing the amount of foreign currency banks need to hold.