(Yicai Global) May 24 -- The People's Bank of China will continue to keep the Chinese yuan's exchange rate stable while two-way fluctuations should become normal, the vice governor said amid the redback's two-month appreciation streak against the US dollar.

The central bank will continue to improve the managed floating exchange rate system on the basis of market supply and demand with reference to a basket of currencies, Liu Guoqiang said in a question-and-answer document published on the PBOC's website yesterday.

The PBOC is responding to market participants' currency appreciation expectations, economists told Yicai Global in interviews. The renminbi has strengthened about 2 percent versus the greenback since late March when the rate weakened to 6.5791, the softest since last November.

International Cues

In the future, movements will continue to depend on market supply and demand and changes in the international financial market, and it will become usual to see the rate rise and fall, said Liu.

Even if the US Treasury bond yields rise and the Federal Reserve tightens its monetary policy, China will not follow the moves passively but is expected to make its currency more market-based and flexible, said Guan Tao, global chief economist at BOC International China.

DXY

In the context of the global forex market and the US Dollar Index, the recent renminbi fluctuations are normal, said international finance expert Zhao Qingming.

Since early April, the DXY has been declining, and hence, other currencies have become firmer, according to the above-mentioned economists. Since the beginning of this year, the exchange rate has both risen and fallen while remaining at an appropriate and balanced level, said Liu.

The PBOC will focus on guiding expectations and automatically stabilize the rate for macroeconomic management and the balance of payments, the vice governor added.

Editor: Emmi Laine, Xiao Yi