PBoC Reaffirms Yuan Policy, Rejects Devaluation Amid Currency Strength
- PBoC defends CNY policy, denies competitive devaluation.
- Cites manufacturing strength for exports, rejects undervaluation claims.
- USD/CNY drops to 6.70; reserves at $3.40T.
- PBoC to report FX ops to IMF starting 2027.
The People’s Bank of China (PBoC) stated on Thursday that it has neither the need nor the intention to depreciate the Chinese Yuan (CNY) for competitive trade advantage. This reiteration, consistent with prior communications, emphasized the central bank’s commitment to allowing market forces to play a decisive role in determining the Yuan’s exchange rate. The PBoC also clarified that it does not set a predetermined exchange rate target or intervene in long-term currency trends. Following these remarks, the Yuan advanced to a four-year high against a basket of its trading partners’ currencies, as the PBoC defended its exchange-rate management and rejected claims of undervaluation.
The People’s Bank of China (PBoC) issued a policy paper defending its foreign exchange policy and rejecting claims of yuan undervaluation, attributing China’s export strength to manufacturing and industrial competitiveness. This release coincides with ongoing talks between Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao. While the PBoC rejected undervaluation, MUFG highlighted BIS REER data showing a 20% fall from its 2022 peak and IMF estimates suggesting a 12-20% undervaluation. The PBoC also committed to begin reporting its foreign exchange operations to the IMF from 2027. China’s foreign exchange reserves slipped to USD3.40 trillion, and in market action, USD/CNY fell 30 pips to 6.70.