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Two-way yuan volatility will become normal, says FX regulator head

06/10/2021 | 01:59am EDT

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 speech.

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 warned.

China will expand quotas under the Qualified Domestic Institutional Investor outbound investment scheme, Pan said.

(Reporting by Winni Zhou and Andrew Galbraith; Editing by Jacqueline Wong)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CHINESE YUAN RENMINBI (AUD/CNY) 0.51% 4.783557 Delayed Quote.-5.51%
BANK OF CHINA LIMITED 0.74% 2.73 End-of-day quote.3.02%
BRITISH POUND / CHINESE YUAN RENMINBI (GBP/CNY) 0.36% 9.004927 Delayed Quote.0.64%
BRITISH POUND / US DOLLAR (GBP/USD) 0.16% 1.3913 Delayed Quote.1.62%
CANADIAN DOLLAR / CHINESE YUAN RENMINBI (CAD/CNY) -0.17% 5.1603 Delayed Quote.1.11%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.26% 0.79761 Delayed Quote.2.14%
EURO / CHINESE YUAN RENMINBI (EUR/CNY) 0.05% 7.6744 Delayed Quote.-3.82%
EURO / US DOLLAR (EUR/USD) -0.11% 1.18631 Delayed Quote.-2.85%
INDIAN RUPEE / CHINESE YUAN RENMINBI (INR/CNY) 0.27% 0.087143 Delayed Quote.-2.72%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.14% 0.013468 Delayed Quote.-1.75%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.45% 0.70173 Delayed Quote.-2.87%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.02% 6.4637 Delayed Quote.-0.51%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.13% 6.4703 Delayed Quote.-0.98%
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