The Chinese yuan weakened past the closely watched 7.2 level against the greenback this week.
BEIJING — The People’s Bank of China has warned against betting on the yuan, after its rapid decline against the US dollar this week.
“Do not bet on a unilateral appreciation or depreciation of the renminbi exchange rate,” the central bank said in a Chinese statement on its website on Wednesday, according to a CNBC translation.
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This is based on reading a speech by Vice Governor Liu Guoqiang during a video conference meeting on foreign exchange that day.
The renminbi, or yuan, broke above the 7.2 level against the greenback on Wednesday, falling to its weakest level since 2008. The U.S. dollar index, which tracks the dollar against major global currencies, hit two-decade highs as the US Federal Reserve aggressively raised interest rates this year.
The PBOC statement, with its requirement for banks to maintain stability in the foreign exchange market, is “verbal advice against the recent rapid currency depreciation,” Goldman Sachs analyst Maggie Wei and a team said. in a note.
However, the yuan’s breach of 7.2 “suggests that China’s policymakers are not necessarily advocating any particular level of the exchange rate,” the report said. The “PBOC statement may slow the pace of CNY depreciation on the margin.”
The onshore-traded yuan has weakened 1.9% against the dollar so far this week, according to Wind Information.
China’s central bank took other steps to support the yuan this month, including reducing the amount of foreign currency banks must hold.