THE yuan’s exchange rate will remain stable in the long run, and two-way trade will be maintained in the currency market, the head of China’s foreign exchange strategy at China’s central bank said Tuesday.

    The yuan has fallen to around 6.27 per U.S. dollar this year, its weakest since 2012, and capital outflows has increased as a result.

    But, Yi Gang, a vice governor of the People’s Bank of China, noted that the yuan only fell about 2 percent versus the dollar in 2014, far less than the euro and the yen, and it remained strong against a basket of foreign currencies.

    “From a long-term perspective, the yuan will definitely remain stable,” said Yi, who heads the central bank’s State Administration of Foreign Exchange (SAFE). Yi made the remarks at the opening of the Chinese People’s Political Consultative Conference (CPPCC), an advisory body to the country’s parliament.

    Investors and corporates have grown increasingly bearish on the yuan, especially as China looks to lower interest rates at home even as yields on dollar debt look set to rise as the U.S. Treasury winds down easing operations.

    The central bank keeps a tight rein on the yuan, allowing the spot rate to trade a maximum 2 percent above or below a midpoint set by the central bank before the market opens each day.

    In recent months, the central bank has played a balancing act, allowing the yuan to gradually weaken against a sharply rising dollar, while trying to maintain a stable pace of decline to avoid destabilizing the wider economy. (SD-Agencies)