SHANGHAI (Reuters) – China’s yuan is unlikely to continue depreciating rapidly, the state-owned Securities Times said in a front-page commentary on Thursday, as currencies continue to be pressured by a U.S. dollar boosted by hawkish Federal Reserve monetary tightening.
Prudent balance of payments has lent support and led somewhat “restrained” losses in the yuan compared with peers, the newspaper said.
“As long as market expectations can be stabilised, and as the policies to support domestic economic growth continue to take effect, it will be hard for the dollar index to bring huge volatility to the yuan,” it said.
Market participants usually view such state media commentary as indicative of authorities growing uncomfortable with rapid currency movement.
The yuan has fallen more than 11% against the dollar so far this year and looks set for its biggest annual decline since 1994.
The People’s Bank of China on Wednesday said stabilising the yuan is a top priority and warned market participants against making heavy one-way bets on the currency.
Also this week, the central bank said financial institutions must increase their foreign exchange risk reserves for purchasing currencies through forward contracts, a move that makes bets against the yuan more expensive.
Monetary authorities are also asking local banks to revive a yuan fixing toolkit abandoned two years ago as they work to defend the rapidly weakening currency, a person familiar with the yuan rate-setting process told Reuters late on Tuesday.
(Reporting by Winni Zhou and Brenda Goh; Editing by Christopher Cushing)