August 13, 2015 / 3:02 AM / in 2 years

China central bank says no basis for further yuan depreciation, will monitor cross-border flows

SHANGHAI (Reuters) - China’s central bank said on Thursday that there is no basis for further depreciation in the yuan currency given strong economic fundamentals, in a bid to reassure jittery global financial markets after it devalued the currency earlier in the week.

A fluttering Chinese national flag casts its shadow on the headquarters of the People's Bank of China, China's central bank, in central Beijing November 24, 2014. REUTERS/Kim Kyung-Hoon

The People’s Bank of China (PBOC) said that the country’s strong economic environment, sustained trade surplus, sound fiscal position and deep foreign exchange reserves provide “strong support” to the exchange rate CNY=CFXS.

The PBOC also said that it will monitor “abnormal” cross border flows.

China’s yuan fell for a third day on Thursday, after the PBOC shocked markets by pushing its official guidance rate down 2 percent on Tuesday, the sharpest adjustment in the history of China’s foreign exchange market.

The PBOC said at the time that the move was a one-off depreciation, but sources involved in the Chinese policy-making process told Reuters that powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 percent.

Reporting by Kevin Yao and Pete Sweeney; Editing by Kim Coghill

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