PBOC vows to keep yuan stable

The People's Bank of China and other regulators pledged to strengthen their management of the foreign-exchange market, deal with any behavior that may disrupt the market and prevent the risk of a large move in the yuan.

Beijing will make sure the currency is basically stable at reasonable levels, the central bank said in a statement.

The PBOC also adjusted its rules for cross-border flows yesterday, allowing firms and financial institutions to borrow more from overseas, which may help increase capital inflows and support the yuan. And the central bank issued a daily reference rate at a level much stronger than analysts' estimates, sending its most forceful signal since April that it intends to stabilize the exchange rate.

The moves helped the yuan defy a wider selloff among Asian currencies against the greenback. The offshore yuan was trading around 7.356 per US dollar in morning trading, around 0.1 percent stronger. But the currency is still trading near an all-time low, following a monthslong decline against the greenback.

The pledges and policy changes underscore the increasing sensitivity of Chinese policymakers to the weakness of the yuan. Although a weaker currency would in theory help the economy by boosting exports, Beijing has consistently stressed the importance of a stable yuan.

The escalation of the PBOC's battle against yuan bears suggests China is not yet ready to let go of its tight grip on the currency, despite pressure from a yawning interest-rate discount to the US, looming tariff threats and a sluggish local economy.

Bloomberg