SHANGHAI/SINGAPORE, Aug 24 (Reuters) – Increased yuan
bill sales by China’s central bank in Hong Kong this week helped
tighten liquidity in the offshore market to help stabilise the
yuan by making it expensive for speculators to short the
currency, according to a former central banker.
The comments by Sheng Songcheng, a former director of the
People’s Bank of China’s (PBOC) statistics and analysis
department, were reported by the state-owned Shanghai Securities
News on Thursday.
Sheng made the observation after the PBOC sold 35 billion
yuan ($4.81 billion) worth of bills in Hong Kong on Tuesday,
exceeding the 25 billion yuan of the bills coming due this
month.
The PBOC usually conducted a flat rollover by auctioning the
same amount of bills as those maturing, and selling a higher
amount would reduce yuan liquidity in the market.
Higher offshore yuan bill sales in Hong Kong “could be
related to recent yuan situations,” Sheng was quoted as saying,
as it would help stabilise foreign exchange market expectations
and is considered to be a policy management tool.
“The yuan exchange rate will not depreciate unilaterally,
but will maintain two-way fluctuations,” he said.
Sheng added that if downside pressure on the offshore yuan
persists, the PBOC could continue to issue more offshore yuan
bills.
Sources told Reuters that China’s major state-owned banks
were seen actively mopping up the offshore yuan earlier this
week, as the currency was coming under growing depreciation
pressure.
Standing at 7.2827 per dollar in late trade on Thursday, the
offshore yuan has lost about 5% against the greenback
since the start of the year, making it one of the worst
performing Asian currencies.
“The yuan exchange rate is supported by solid economic
fundamentals in the mid- to long-term. China’s sound economic
fundamentals in the long-run have not changed. As the economy
continues to stabilise, the yuan will remain basically stable,”
Sheng said.
($1 = 7.2771 Chinese yuan)
(Reporting by Winni Zhou and Tom Westbrook; Editing by Simon
Cameron-Moore)
