China’s currency, the renminbi, is at an appropriate level now, a senior central bank official said on Tuesday, adding that two-way fluctuations in the unit will not necessarily cause disorderly capital flows.
“The current level of RMB exchange rate is appropriately aligned with fundamentals of China’s economy and market supply and demand,” Zhu Jun, head of the international department of the People’s Bank of China (PBoC), told Reuters.
Beijing was “shocked” by the US Treasury Department’s move last week to label China a currency manipulator, the PBoC official was quoted as saying in an interview.
But Zhu asserted that China will be able to “navigate all scenarios” arising from Washington’s currency-manipulator label, which came hours after Beijing let the yuan drop through a key support level to its lowest point in more than a decade.
In the short run, external shocks will also play a role by influencing the yuan’s movements, the central bank official said.
“That said, as long as RMB moves in an orderly manner based on market supply and demand, such movements in either direction do not necessarily mean disorderly movement of capital flow,” Zhu said.
The yuan will be supported by China’s solid economic fundamentals, a stable debt ratio, contained financial risks, adequate foreign exchange reserves, and favorable interest rate spreads between China and major advanced economies, she said.
“Over the medium and long term, we have full confidence in RMB as a strong currency,” Zhu said.
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