BEIJING (Reuters) - China’s central bank is “fully capable” of stabilizing the yuan through currency intervention, the China Business News quoted Ma Jun, chief economist at the People’s Bank of China, as saying.
“When necessary, the central bank is fully capable of stabilizing the exchange rate by directly intervening in the foreign exchange market,” the newspaper quoted Ma as saying.
On Tuesday, the central bank shocked global markets by devaluing the yuan by nearly 2 percent, a move it billed as a free-market reform but which some suspect could be the beginning of a long-term currency slide to spur exports.
The yuan weakened further on Wednesday, hitting a four-year low, as the central bank was suspected of intervening via state banks to support the yuan.
The yuan’s fall in the past two days was “within control” and the country’s $3.65 trillion in foreign exchange reserves - the world’s largest - could provide a cushion for the yuan currency, Ma said.
Ma shrugged off suggestions that China could initiate a global round of competitive currency devaluations, saying the world’s second-largest economy may still grow around 7 percent this year - in line with the government’s target.
A run of poor economic data this month, from exports to investment and factory output, suggested the slowdown may have worsened despite four interest rate cuts since November.
Reporting by Kevin Yao; editing by Andrew Roche