China's authorities are tightening their grip on the country's foreign exchange market to support the local currency. Lately, the yuan has been subject to heavy selling and ultra-bearish market sentiment. To prop up the yuan, Beijing delivered a strong verbal warning to speculators early this autumn. In a guidance to investors, the country’s central bank issued a daily reference rate for trading the yuan. This move pushed the renminbi up from a 16-year low against the US dollar where it slid on pessimistic economic data. To further shield the currency, local financial authorities have pledged to intervene in the currency market "whenever needed," with the sole purpose of ensuring the yuan's stability. These precautionary remarks from the People's Bank of China (PBOC) concerning the yuan came right after policymakers set a daily fixing rate for the yuan, which unexpectedly exceeded forecasts by a record margin. Concurrently, state-owned lenders were also seen offloading US dollars. As the PBOC emphasized in a statement, “forex participants should voluntarily maintain stability in the market.” They should “resolutely avoid behaviors that disturb market orders such as conducting speculative trades,” the regulator added.
