Time right to loosen controls on yuan-dollar exchange rate, says China state-run paper
Comments suggest Beijing’s worries over the weakness of the nation’s currency may be fading, as the value of the greenback slides in global markets
The time is now right to allow greater volatility in the Chinese currency’s exchange rate with the dollar, a state-run newspaper said in a front-page commentary, signalling that Beijing’s concerns over the sharp depreciation in the yuan are easing as the greenback’s value slides.
Beijing has been on the defensive over the value of the yuan for nearly two years after its abrupt two per cent devaluation of the currency in August 2015 roiled global markets.
The Chinese government has taken a slew of measures, from draconian curbs on capital outflow to the adoption of opaque and complex changes to the yuan exchange regime, to keep the currency from weakening sharply.
The China Securities Journal, a newspaper run by the state-run Xinhua news agency, said in an editorial on Tuesday that it was now time for the People’s Bank of China to tolerate greater volatility in the yuan exchange rate.
“The one-sided bet on yuan deprecation has been broken,” the editorial said “Cross-border capital flow has been stabilised and improved in the first half, while supply and demand in the forex market has basically balanced – it is in the most balanced period for the past three years. It’s good timing for China to boost yuan exchange rate flexibility in the short term.”
The yuan has already advanced to a nine-month high against the US dollar. The US dollar index, which compares its value with a basket of currencies, now hovers at a near one-year low as the value of the greenback weakens.
