China’s central bank has recently intervened to stabilize the yuan’s value, which has been under significant pressure. With the U.S. trade war intensifying, the People’s Bank of China (PBOC) moved to limit excessive currency fluctuations.
The move, however, aims to balance the yuan’s value without triggering major instability in the market.
This week, PBOC instructed state-owned banks to halt additional purchases of U.S. dollars. The directive seeks to curb speculative trading in the foreign exchange market, which could worsen the yuan’s decline. Financial institutions were also told to carefully check their dollar-buying orders for clients.
On Wednesday, after the intervention, the yuan managed to recover slightly, giving the market a brief respite. The onshore yuan’s value was measured at 7.35 per dollar, while the offshore yuan reached a record low.
PBOC Aims for Controlled Depreciation, Not Drastic Drop
Despite the pressure on China’s exports, the PBOC has made it clear it won’t allow a sharp devaluation. A drastic drop in the yuan would only undermine market trust and encourage capital flight. However, the central bank is open to a gradual depreciation to help maintain export competitiveness.
Alongside managing the yuan, China plans to support key industries through various financial strategies, including subsidies and tax rebates. These actions are intended to offset the impact of U.S. tariffs, which have now escalated to a staggering 104% on Chinese goods.
China Maintains Focus on Market Stability Amid Trade Strains
The PBOC’s moves reflect its priority of stabilizing financial markets. As the trade war with the U.S. worsens, China’s response focuses on maintaining currency stability and managing export challenges. The central bank intends to keep the yuan’s movement in check while reducing the risk of further economic harm.
The Chinese government, alongside PBOC, continues to monitor the situation closely. Its focus is to avoid excessive fluctuations while positioning the economy to deal with external trade pressure.
Alexander Stefanov
Reporter at Coindoo
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over 8 years of experience covering the crypto, blockchain and fintech industries, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics.
Source: https://coindoo.com/chinas-central-bank-urges-to-reduce-dollar-purchases/