Message from the People's Bank of China to defend the yuan

The People's Bank of China has stated that it has many tools against possible panic in the country's currency, the yuan. An article published in the bank's official publication Financial News determined that the depreciation in the yuan was due to short-term factors stemming from the economic recovery not meeting expectations. The article listed the foreign exchange risk-reserve ratio, banks' foreign exchange deposit-reserve ratio and the countercyclical factor used in determining the reference rate of the People's Bank of China as tools that can be adjusted against the depreciation of the exchange rate. Mizuho Bank Currency Strategist Ken Cheung commented, "This article aims to boost the confidence of yuan investors. It also sends the message that the depreciation of the yuan will be kept under control." Following the publication of the article, the People's Bank of China set the dollar/yuan reference rate at 7.2098 this morning, below average expectations. According to Cheung, this morning's reference rate shows that the People's Bank of China is on alert against possible depreciation in the yuan.