SHANGHAI, June 10 (Reuters) - Two-way volatility in the yuan
exchange rate will become normal, and factors influencing the
Chinese currency are complicated, the head of China's foreign
exchange regulator said on Thursday.
China's yuan has shown two-way volatility but has
been basically stable so far this year, Pan Gongsheng, head of
the State Administration of Foreign Exchange (SAFE), said in a
The yuan has experienced sharp volatility recently, having
gained about 12% against the dollar since May 2020 and hitting
its firmest levels in more than three years.
Many Chinese policymakers have warned market participants
recently against betting on one-sided moves in the currency, and
the People's Bank of China (PBOC) last week raised the reserve
requirement ratio on foreign exchange deposits for the first
time in 14 years.
The FX regulator said companies should avoid "procyclical"
and "naked" activities in managing their exchange rate risks, as
some were found to have relied on currency mismatch of assets
and liabilities to benefit from changes in exchange rates. Pan
was referring to companies not hedging their FX trades.
"Don't bet on appreciation or depreciation in the yuan.
(People who) always gamble will definitely lose," Pan said.
The SAFE head added that global market valuations were
elevated against the backdrop of ultra-loose monetary policy
stimulus, and international financial markets could face
correction risks from such high levels.
Global markets have "detached from economic fundamentals,
vulnerability has increased...it could lead to a rise in global
risk aversion and changes to cross-border capital flows," Pan
China will expand quotas under the Qualified Domestic
Institutional Investor outbound investment scheme, Pan said.
(Reporting by Winni Zhou and Andrew Galbraith; Editing by