Adjustment to close the gap between the central parity rate and the actual trading rate of China's currency, the renminbi (RMB) or yuan, is basically complete, an official of the People's Bank of China (PBOC) said Thursday at a press conference.
The value of the yuan has gradually returned to market levels after declines during previous days, and the yuan will remain strong in the long run with no basis for persistent and substantial depreciation, said Zhang Xiaohui, assistant governor of the PBOC.
Zhang said that previously there was a 3-percent gap in the yuan's value between the rate and market expectations.
The central parity rate of the yuan weakened by 704 basis points, or 1.1 percent, to 6.401 against the U.S. dollar on Thursday, narrowing from Wednesday's 1.6 percent and almost 1.9 percent on Tuesday.
On Tuesday, the People's Bank of China reformed the exchange rate formation mechanism to better reflect market development in the exchange rate of the yuan against the U.S. dollar.
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China central bank says capable of stabilizing yuan
The recent fluctuation of the yuan exchange rate is "within control" and the central bank is "fully capable" of stabilizing the market if necessary, a central bank economist said on Wednesday.
"The central bank, if necessary, is fully capable of stabilizing the exchange rate through direct intervention in the foreign exchange market to avoid herd mentality resulting in irrational movements of the rate," economist Ma Jun with the People's Bank of China told reporters.
In addition to China's economic fundamentals that will underpin a stable currency, the country's substantial foreign exchange reserve, the world's largest at 3.7 trillion U.S. dollars, will make it better placed to stabilize the rate in the near term, Ma noted.
His comments came as the Chinese currency continued to fall on Wednesday after the central bank changed the exchange rate formation system to better reflect the market.
The central parity rate of renminbi, or yuan, weakened by 1,008 basis points, or 1.6 percent, to 6.3306 against the U.S. dollar, narrowing from Tuesday's 2 percent.
