China’s yuan: will the central bank defend the falling currency as its new Communist Party chief takes the helm?

The central bank has tried to assure the market that it is equipped with the necessary toolbox to maintain stability, and it emphasised the deepening of market-oriented reforms in the exchange rate system.

“The exchange rate of the Chinese yuan fluctuates in both directions, while remaining fundamentally stable at a reasonable and balanced level, serving as a stabilising force for the macroeconomy,” the meeting summary said.

The offshore yuan weakened to 7.28 against the US dollar on Friday, falling by 4.7 per cent since the start of the year to the lowest level since November. The PBOC has so far refrained from direct intervention in the foreign exchange market to steady the yuan.

The government set the yuan’s daily reference rate at 7.2258 on Friday.