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China Yuan Assets not 'Bargaining Chip' for Gamblers, Xinhua

SHANGHAI, June 2 (Reuters) - Chinese yuan-denominated assets are not a “bargaining chip” for gamblers, the official Xinhua news agency said in a commentary on Wednesday, in the latest attempt to curb speculative bets on a further rally in the currency.

The remarks came as China’s yuan hovered at a three-year high against the U.S. dollar, after rising 1.4% in the past four weeks.

A host of Chinese policymakers have warned market participants recently against betting on one-sided moves in the currency, and the People’s Bank of China (PBOC) this week raised the reserve requirement ratio on foreign exchange deposits for the first time in 14 years.

A weaker U.S. dollar, China’s better coronavirus containment and solid economic data were among the factors supporting the yuan rally, the state media said, calling “investors to pay attention not only to market movements, but also to long-term (economic developments) to make wise decisions”.

“China has consistently adhered to a managed floating exchange rate system, any malicious manipulation of the market or malicious creation of one-way expectations will inevitably be hit or hedged, as transaction costs are high and the potential risks are huge,” Xinhua said.

“In fact, the PBOC has begun to tighten FX liquidity in the domestic market, intended to significantly increase speculation cost,” it added.

The commentary also said that chances of a bounce in the U.S. dollar could not be ruled out once the Federal Reserve makes a shift in its ultra-easy policy stance as the U.S. economic recovery picks up.

On Wednesday, the spot yuan was little changed and pinned in a narrow trading range, as investors continued to debate how much more appreciation authorities will tolerate.

Reporting by Winni Zhou and Andrew Galbraith

Source: Reuters

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