Chinese yuan to stay basically stable, state media cites central banker

BEIJING - China's yuan, or renminbi, will stay basically stable despite fluctuations, state radio cited the deputy chief of China's central bank as saying on Sunday.

The yuan has been under pressure in the past month due to increased year-end dollar demand by some firms and growing market expectations of more policy easing after the central bank made a surprise cut to interest rates in November. Such easing is seen as negative for the yuan.

"The renminbi has so far this year moved by about 2 per cent against the US dollar, not yet considered a depreciation," Yi Gang, deputy head of the People's Bank of China (PBOC), told state radio.

The central bank has gradually been exiting regular intervention of the foreign exchange market, and China's foreign exchange reserve has held stable. "Judging from all angles, looking at the globalisation of the yuan ... we have all reason to believe that the exchange rate of renminbi will stay basically steady at a reasonable and balanced level," Yi said.

The central bank has signaled it does not want the yuan to collapse, strengthening the official guidance rate, but traders said it has been intervening less in the spot market, which is allowed to trade 2 per cent higher or lower than the midpoint on any given day.