China is stepping up its defenses against a slumping yuan with the ruling authorities issuing its strongest determination ahead of several major central bank police inquiries this week.
As of Monday, the People's Bank of China (PBOC) had set the yuan at 6.9396 to the US dollar, stronger than expected.
Royal media said last week that companies should not bet on the direction and rate of currency movements, as the yuan will essentially remain stable after its recent decline in value.
The increase in the PBOC's defenses came at the start of a week filled with global central bank messages, in which the Federal Reserve (Fed) and Bank of England (BOE) are expected to raise interest rates to fight inflation.
This would lay the groundwork for China's loose monetary policy further than other major central banks, a move that could potentially expose the attractiveness of the yuan-dominated assets.
In addition, the PBOC also lowered the cost of its 14-day reverse repo** loan to 2.15% from 2.25% and increased its cash injection of 2 billion yuan to maintain a steady liquid level towards the end of the third quarter.
**Reverse repo is the purchase of security with an agreement to sell it at a higher price on a certain date and time.
Meanwhile at the end of the week, China had increased its grip on the US treasury for the first time in 8 months.
