Central Bank Forced To Support Yuan

Central bank forced to support yuan

REUTERS
China's central bank waded into the national foreign exchange market again on Monday to support the yuan amid continuing fears that the currency may be devalued, dealers said.

The People's Bank of China bought the yuan in the tightly controlled market to hold it at 8.2800 to the US dollar, the third time since July 31 that the central bank had intervened, they said.

The yuan has been pressured by the sagging Japanese yen on world currency markets, but repeated intervention by the central bank had helped the currency finish above the key 8.2800 level for the past few weeks, dealers said.

There was no indication of the volume of central bank's yuan buying on Monday, but dealers said trading overall was light.

A spokesman for the People's Bank in Beijing declined to comment.

The move helped the yuan close at 8.2800 to one dollar, little changed from the 8.2799 on Friday.

Dealers said the central bank would continue to defend the 8.2800 mark and a fall below that key level could indicate a shift in policy.

State banks also bought the yuan after President Jiang Zemin told Japanese Foreign Minister Masahiko Komura on Sunday that Beijing was determined to avoid devaluing the yuan despite a slowing economy, they said.

''The pledge helped boost confidence among domestic banks that the yuan was not likely to be devalued, at least for the time being,'' one dealer said.