RMB expected to stabilize after forex adjustment

A MORE MARKET-DETERMINED YUAN

Another senior official, Yi Gang, dismissed media reports that Chinese authorities had demanded 10-percent depreciation in the yuan by the end of 2015 in hopes of rescuing the country's slipping exports, describing such reports as "completely baseless."

"Under a managed floating exchange rate system, the value of the yuan is determined by the market," said Yi, who serves as deputy governor of the PBOC and director of the State Administration of Foreign Exchange.

Yi said the central bank "no longer regularly intervenes in the exchange rate but will continue to manage it, especially when volatility exceeds a tolerable range, to let market forces decide the yuan's valuation."

The central parity rate is currently released before the opening of the interbank market each trading day, based on a weighted average of prices offered by market makers and referring to the closing price on the previous day. The yuan is allowed to trade on the spot market within 2 percent of the rate.

The system fits China as it allows for flexibility in the rate and enables effective control of excessive volatility, which boosts market confidence and facilitates stable economy, according to Yi.

"The mechanism improvement is a boon for market confidence and the global journey of the currency," he said.