Market plays decisive role in exchange rate: Yi Gang
China's central bank governor Yi Gang said China would continue to let the market play a decisive role in establishing its currency exchange rate, refraining from using it as a tool, amid an escalating trade war with the U.S.
China's central bank governor Yi Gang on Saturday promised to keep the yuan currency's value "broadly stable" at International Monetary Fund and World Bank annual meetings in Bali, Indonesia, where the IMF attempted to prod the world's two largest economies to resolve their disputes.
The People's Bank of China governor's statement to the IMF steering committee echoed Fund members' to avoid competitive currency devaluations.
"China will continue to let the market play a decisive role in the formation of the RMB exchange rate," Yi said in the statement. "We will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions."
A communique issued by the IMF's member countries on Saturday - which followed fresh tumult in financial markets - also sought to soothe nervous investors with a pledge to step up their dialogue on trade issues.
U.S. Treasury Secretary Steven Mnuchin said on Saturday that Chinese officials told him that further yuan depreciation was not in China's interests.
"We want to make sure that [yuan] depreciation is not being used for competitive purposes in trade," Mnuchin told reporters on Saturday.
In the communique from the International Monetary and Financial Committee, the Fund's member countries also agreed to debate ways to improve the World Trade Organization so it can better address trade disputes.
"We acknowledge that free, fair, and mutually beneficial goods and services trade and investment are key engines for growth and job creation," the IMFC said in the statement.
"We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes," it added.
According to a Bloomberg report on Friday, the U.S. Treasury Department's staff has advised Secretary Steven Mnuchin that China isn't manipulating the yuan as the Trump administration prepares to issue a report on foreign currencies, citing two people familiar with the matter.
The conclusion, if accepted by Mnuchin, would avert an escalation of the U.S.-China trade war and remove a source of anxiety for emerging markets. Mnuchin could issue a different finding.
The Treasury Department's congressionally mandated twice-a-year report assessing whether trade partners are manipulating their currencies is on track for release soon.
