Exchange rate with US dollar expected to stay stable

The exchange rate of the RMB is expected to remain stable at about 7 yuan per dollar, floating slightly up or down from this point in the future, despite external financial fluctuations, said Chinese financial regulators on Sunday.

Affected by the global spread of the novel coronavirus, international foreign exchange markets fluctuated sharply in recent trading days.

"The RMB exchange rate also showed volatility, but it is still at a reasonably stable equilibrium," Chen Yulu, deputy governor of People's Bank of China, the central bank, told the media in Beijing. 

As of Friday, the onshore-traded RMB had depreciated by 1.4 percent against the US dollar this year, compared with a 13.4 percent drop of emerging market currency index. During the same period, the US dollar index rose by 5.2 percent, which reflected a relatively stable value of the RMB, said Xuan Changneng, deputy head of State Administration of Foreign Exchange (SAFE) said on Sunday.

The rise of the US dollar index was mainly due to the US dollar liquidity crunch, not because of the (deterioration of the) economic fundamentals," said Xuan.

Some major economies have taken sub-zero policy rates, but China still maintains conversional monetary policy, which resulted in a larger interest rate spread between domestic and overseas. That also increased the value and attraction of RMB assets for global investors, he added.

In the first two months, foreign exchange settlement by banks in China reached a surplus of $20.6 billion, and the foreign exchange reserves maintain $3.11 trillion, both indicators have shown a general balance in the foreign exchange market, the SAFE official said.

While oil prices in the global commodity market dropped sharply amid the fast spread of the novel coronavirus epidemic, and international financial market showed turbulence, the foreign exchange regulator vowed to take closer supervision and measures to offset potential cross-border capital flow risks.