China's central bank fixes yuan at four-week low despite pledge

China's central bank on Monday fixed its central rate for the yuan currency at a four-week low, data showed, despite comments by chief Zhou Xiaochuan that there was no basis for further depreciation.

The People's Bank of China (PBOC) set the yuan at 6.5452 to $1.0, down 0.17% from Friday, according to the China Foreign Exchange Trade System. The fix was the weakest since February 3, previous figures showed.

The weaker currency hurt the sentiment on the stock market, with the benchmark Shanghai Composite Index dropping as much as 4.44% on Monday morning.

PBOC Governor Zhou Xiaochuan on Friday told a seminar on the sidelines of the G20 finance ministers' meeting in Shanghai that the yuan -- also known as the renminbi (RMB) --- would be stable.

"There is no basis for persistent renminbi depreciation from the perspective of fundamentals," he said.

Authorities only allow the yuan to rise or fall 2% on either side of the daily fix, to prevent volatility and maintain control over the currency.

But a shock currency devaluation in August, which saw the normally stable unit guided down nearly 5% in a week followed by another drop in January, raised suspicions that Beijing is pursuing a currency war to make its exports cheaper. The Central bank chief Xiaochuan had denied those accusations on Friday.

In a communique, G20 countries on Saturday had pledged to avoid "competitive devaluations", though the document made no direct mention of China.

Xiaochuan and other Chinese officials have repeatedly pledged to move towards a more flexible exchange rate.

The US Treasury Secretary Jacob Lew, who is visiting China, on Monday has urged the country's premier Li Keqiang to implement economic reforms.

"It is also critical that China continues to move toward a more market-determined exchange rate in an orderly manner," he said in Beijing.

The yuan was quoted at 6.5480 to $1.0 around midday on Monday, weakening slightly from Friday's close of 6.5372.

The central bank said it has pumped 230 billion yuan (nearly $35 billion) into the financial system on Monday, bringing total fund injections over the past week to over 1.0 trillion yuan, according to state media.



Link : http://www.dnaindia.com/money/report-china-fixes-yuan-at-four-week-low-despite-pledge-2183751