No basis for yuan to depreciate further, says China CB boss

It was the biggest fall since March a year ago and much worse than economists’ expectations for a drop of less than 2 per cent. Imports, meanwhile, dived 18.8 per cent.

The currency advanced 0.89 per cent, the most since the nation scrapped a peg to the dollar in July 2005, to 6.5174 a dollar as of 9:46 a.m.in Shanghai, according to data compiled by Bloomberg.

China’s yuan currency surged more than one percent against the dollar on Monday, its biggest rise in over a decade, after the central bank chief said there was no reason the beleaguered unit should fall further.

Zhou was also reported as saying that a short-term decline in foreign-exchange reserves is not a concern and that China has sufficient funds for payments and maintaining stability.

It has also been a factor in the decline of the yuan currency in recent months, but analysts said the record trade surplus gave Chinese officials some breathing room to cope with the floods of cash that have flowed out of the country.

“The yuan has held relatively firm against a basket of currencies and there remains no basis for its continued depreciation”, said Yao Yudong, head of the Research Institute of Finance and Banking, the People’s Bank of China.

PetroChina Co rose 2.4 percent to 7.35 yuan (US41.13), and China Petroleum & Chemical Corp gained 2.6 percent to 4.41 yuan.

Meanwhile, stocks in China fell Monday, making up for losses in markets around the world last week as the mainland reopened following the Lunar New Year holiday.

“We have seen increased volatility in the yuan’s value against the dollar since late December”, said a dealer at an European bank.

But the People’s Bank of China appears to be doing the opposite. China’s blue-chip CSI300 index jumped 2.9 percent, to 3,030.59 points by the lunch break, while the Shanghai Composite Index advanced 2.8 percent, to 2,823.86 points.

Last month, yuan-denominated cross-border trade settlement reached 564.3 billion yuan.

Still, China is now posting its slowest annual growth in 25 years, raising questions about how quickly the country’s once red-hot economic engine is cooling off.

Diesel exports in the first quarter of 2016 may high a record high for that period, flooding Asia with supply at a time when profit margins are close to six-year lows, industry sources have said.