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Recent RMB Falls Shouldn’t Be Over-Read: China Currency Regulator

02-27 11:06 Caijing
The renminbi dropped for the seventh consecutive day Wednesday to close at 6.1244 after hitting a new low since July 31st, triggering speculations over the central bank's guidance.

The recent fluctuations seen in RMB value are within a normal range and shouldn't be over-read, said China's currency regulator on Wednesday.

The renminbi dropped against the U.S. dollar for the seventh consecutive day Wednesday to close at 6.1244 after hitting a new low since July 31st, triggering speculations over the central bank's guidance.

Two-way fluctuations in renminbi will become a norm with market playing a bigger role in leading the foreign exchange reform, according to a statement released by the State Administration of Foreign Exchange (SAFE) on its website.

Some analysts believe the renminbi depreciation is an intentional move from the People's Bank of China (PBoC) to rein in capital inflows to cash in on China's higher interest rates.

Others said the move came from the central bank's pledge to bring more market forces to the way China's partly-convertible currency is valued. The PBoC said on Feb 21st that it will widen the trading band of the Chinese currency.

"The RMB exchange rate has basically remained stable while emerging markets currencies mostly dropped," the SAFE said in the statement.

The RMB real effective exchange rate (REER) index for January 2014 was 121.20, up 2.07 percent from the previous month, the SAFE cited the latest figures released by the Bank for International Settlements (BIS).

Overseas capital kept flowing in with the surplus in both spot and forward foreign exchange transactions hiking to new highs, the regulator announced.

The SAFE downplayed the possibilities of large-scale capital outflows in the future as it remained upbeat about China’s economic prospects.

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