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Yuan devaluation not a long-term trend: analysts

02-26-2014 16:40 BJT

By CCTV reporter Zhang Mengyuan

The currency depreciation of yuan against U.S. dollar on Wednesday has triggered some worries in the market. But most analysts say the drop won't be a long-term trend.

Gong Qi is a ten-year money trader in Shanghai and thinks the ups and downs of a currency's value are normal. But the recent depreciation of the yuan still surprised him.

"It's normal for the yuan to appreciate or depreciate under the two-way volatility. But such a dramatic change is very rare," said Gong, of Bank of Shanghai.

Still, Gong Qi believes that the yuan will continue to appreciate against the U.S. dollar in the long run. "Personally, I think 6.122 will be the turning point for the USD/RMB rate. Then the yuan will appreciate again," he said.

Analysts also hold similar opinions. Profesor Ding Zhijie at the University of International Business and Economics gave his views on depreciation:

"Recently, the liquidity of the Chinese finance market has been ample, especially in February. January's cash flow in the market increased more than 1.3 trillion yuan, which should return to the banking system after the Spring Festival.

"Under these circumstances, the currency depreciation can weaken capital inflows, which could lead to more easing liquidity in the market. From this aspect, we could say the devaluation is likely a government move, a kind of regulation measure."

Professor Ding also says that the depreciation signals exchange rate reforms in the long term. Analysts say China's central bank is trying to prepare the market for two-way volatility, before speeding up yuan reforms.


Editor:James |Source:

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