BEIJING- The rapid appreciation of China’s yuan against the US dollar may have overshot and will not be sustainable, a former central bank official said in an interview with state media Xinhua News on Sunday.
The yuan has gained 1.7 percent so far in May to trade at three-year highs. It breached the psychologically important 6.4 per dollar level last week, but the pace of its rally has slowed after regulators signaled concerns over strong one-way bets on the currency.
The People’s Bank of China (PBOC) on Friday set the midpoint rate of the yuan at 6.3858 per dollar, the strongest since May 2018.
While China’s economy has rebounded quickly from a pandemic-induced slump early last year, the yuan’s gains have been largely chalked up to sustained weakness in the dollar.
Investors had increased their bets on further strength in the Chinese unit after the PBOC appeared not to show discomfort with recent gains. But big state-owned banks were seen buying US dollars early last week in a move seen as an effort to temper fast yuan gains.
Sheng Songcheng, former director of the surveys and statistics department at PBOC, said the overshot of the yuan signals short-term speculation and is unsustainable.
“We will prevent short-term money flooding from pushing up the yuan and diminishing the competitiveness of export firms,” said Sheng.
