The People's Bank of China (PBOC) met in Monday the officials of China's biggest banks to emphasize support for the stability of China's Yuan currency and to address any "Yuan herd behavior."
The PBOC encouraged the banks to stop the adverse behavior of herding China's Yuan money. The PBOC also discourage any "momentum-chasing" tactics in the foreign exchange currency market. The PBOC added that it is utilizing its various tools and mechanisms in stabilizing China's Yuan currency and to keep it more flexible, allowing it to move in various directions in the world market.
Some market experts and analysts surmised that the Chinese Government is now taking proper measures in addressing the weakening of China's Yuan brought mainly by China's ongoing trade tension with the U.S. For the past three months, China's Yuan plunged to 6.7 percent against U.S. Dollar. It is said that this is the biggest dive of an Asian currency.
The PBOC's meeting with China's biggest lenders is a sign that Chinese officials are now focusing its efforts to avoid capital outflows same that of 2015-2016 wherein China dropped billions of dollars in its reserve for foreign exchange.
During the said meeting, PBOC officials said that China will not fight the market forces just to address threats on the weakening Yuan currency. The PBOC also stressed that the Chinese Government is taking proper and balanced measures to support the stability of China's Yuan. Accordingly, the "cross-border capital flows are balanced overall." The Chinese Government is also not feeling the pressure as it remains calm and straightforward in lifting up Yuan's stand in the world market.
The attending bank officials during the meeting also expressed their idea of counter-cyclical factor to help China's Yuan stabilize in the market.
"This move is consistent with what the PBOC did earlier. It can be considered as preemptive efforts made to slow the Yuan's depreciation, prevent one-sided bets on weakness and avoid a sense of panic," according to Standard Chartered Plc Asian Foreign-Exchange Strategist Eddie Cheung who is based in Hong Kong.
Cheung believes that China's Yuan is stronger than U.S$7 despite that China Yuan is under pressure due to China-U.S. trade tension and differences in monetary policies.
"That is strong psychological level," Cheung said.
Early in July, PBOC Governor Yi Gang said his support for China's Yuan. He said that the Yuan is holding strong despite trade threats from the U.S. Government.
