China is seeking a greater role in global commerce for the yuan
Shanghai - AFP
China's central bank on Monday fixed the value of the yuan higher by the biggest margin for more than three months after its chief Zhou Xiaochuan said there was no reason the unit should fall further.
The People's Bank of China (PBoC) set the yuan at 6.5118 to $1.0, strengthening 0.30 percent from the fix on February 5 which was the last trading day before a long holiday, according to figures from the national foreign exchange market.
It was the biggest jump since November 2. In January Beijing guided the unit down by setting its daily fix lower for eight consecutive sessions.
China is seeking a greater role in global commerce for the yuan, but limits the currency to rising or falling two percent on either side of the daily fix.
In early afternoon on Monday the yuan was quoted at 6.4900 to $1.0, up more than one percent from the February 5 closing rate of 6.5695, data from the China Foreign Exchange Trade System showed.
The increase was its biggest rise in more than a decade, according to Bloomberg News.
In an interview with Caixin magazine published over the weekend, PBoC head Zhou blamed foreign speculators for volatility in the yuan and said there was no reason it to fall further.
"There is no foundation for continued depreciation," he told the magazine, according to a transcript posted on the bank's website.
The Chinese economy grew 6.9 percent in 2015 -- the slowest rate since 1990 -- and capital has been flowing out of the country due to worries over the flagging growth, causing the currency to weaken.
January's decreases in the yuan fix represented a 1.4 percent fall and raised worries of a creeping devaluation. They echoed moves in mid-August when China adjusted the yuan down nearly five percent over a week, spurring fears it was pursuing a currency war to help boost its flagging exports.
Chinese exports dropped 11.2 percent year-on-year to $177.5 billion in dollar terms in January, Customs said on Monday, as feeble external demand dragged on the world's second-largest economy.
Analysts said the yuan was still likely to depreciate further this year.
"His (Zhou's) comments signal against the intention for a sharp one-off devaluation, but leave scope for possible further round(s) of gradual depreciation," Goldman Sachs said in a research note on Monday.
UBS forecast the yuan would weaken to 6.8 to $1.0 by the end of the year but the movement would be gradual.
"The probability of China holding (US dollar/Chinese yuan) stable in the next few months is greater than a significant depreciation or a one-off adjustment," it said.