People walk past the headquarters of the People's Bank of China (PBOC), the central bank, as two paramilitary police officials patrol around it in Beijing. Picture: REUTERS
People walk past the headquarters of the People's Bank of China (PBOC), the central bank, as two paramilitary police officials patrol around it in Beijing. Picture: REUTERS

SHANGHAI — China’s central bank on Monday fixed its rate for the yuan currency at a four-week low, data showed, despite comments by the bank’s governor, Zhou Xiaochuan, that there was no basis for further depreciation.

The People’s Bank of China (PBoC) set the yuan at 6.5452 to the US dollar, down 0.17% from Friday, according to the China Foreign Exchange Trade System. The fix was the weakest since February 3, previous figures showed.

The weaker currency hurt sentiment on the stock market, with the benchmark Shanghai Composite Index closing down nearly 3% on Monday after dropping as much as 4.63%. PBoC governor Mr Zhou on Friday told a seminar on the sidelines of the Group of 20 (G-20) finance ministers’ meeting in Shanghai that the yuan — also known as the renminbi — would be stable.

"There is no basis for persistent renminbi depreciation from the perspective of fundamentals," he said.

Authorities only allow the yuan to rise or fall 2% on either side of the daily fix, to prevent volatility and maintain control over the currency.

The yuan was quoted at 6.5472 to the US dollar at 8.30am GMT on Monday, slightly weaker from Friday’s close of 6.5372.

But a shock currency devaluation in August, which saw the normally stable unit guided down nearly 5% in a week followed by another drop in January, raised suspicions that Beijing was pursuing a currency war to make its exports cheaper.

Mr Zhou denied those accusations on Friday. In a communique, G-20 countries on Saturday pledged to avoid "competitive devaluations", though the document made no direct mention of China.

Mr Zhou and other Chinese officials have repeatedly vowed to move towards a more flexible exchange rate. US Treasury Secretary Jacob Lew, who is visiting China, on Monday urged the country’s premier, Li Keqiang, to implement economic reforms.

"It is also critical that China continue to move toward a more market-determined exchange rate in an orderly manner," he said in Beijing.

The central bank said it pumped 230-billion yuan ($35bn) into the financial system on Monday to ease tight liquidity, bringing total fund injections over the past week to more than 1-trillion yuan, according to state media.

AFP