Economic news

PBOC Boosts Offshore Bill Sales to Stabilise Yuan, ex-Official

SHANGHAI/SINGAPORE, Aug 24 (Reuters) - Increased yuan bill sales by China's central bank in Hong Kong this week helped tighten liquidity in the offshore market to help stabilise the yuan by making it expensive for speculators to short the currency, according to a former central banker.

The comments by Sheng Songcheng, a former director of the People's Bank of China's (PBOC) statistics and analysis department, were reported by the state-owned Shanghai Securities News on Thursday.

Sheng made the observation after the PBOC sold 35 billion yuan ($4.81 billion) worth of bills in Hong Kong on Tuesday, exceeding the 25 billion yuan of the bills coming due this month.

The PBOC usually conducted a flat rollover by auctioning the same amount of bills as those maturing, and selling a higher amount would reduce yuan liquidity in the market.

Higher offshore yuan bill sales in Hong Kong "could be related to recent yuan situations," Sheng was quoted as saying, as it would help stabilise foreign exchange market expectations

and is considered to be a policy management tool.

"The yuan exchange rate will not depreciate unilaterally, but will maintain two-way fluctuations," he said.

Sheng added that if downside pressure on the offshore yuan persists, the PBOC could continue to issue more offshore yuan bills.

Sources told Reuters that China's major state-owned banks were seen actively mopping up the offshore yuan earlier this week, as the currency was coming under growing depreciation pressure.

Standing at 7.2827 per dollar in late trade on Thursday, the offshore yuan has lost about 5% against the greenback since the start of the year, making it one of the worst performing Asian currencies.

"The yuan exchange rate is supported by solid economic fundamentals in the mid- to long-term. China's sound economic fundamentals in the long-run have not changed. As the economy continues to stabilise, the yuan will remain basically stable," Sheng said.

($1 = 7.2771 Chinese yuan)

Reporting by Winni Zhou and Tom Westbrook; Editing by Simon Cameron-Moore

Source: Reuters


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