Xinhuanet, the website sponsored by the Xinhua News Agency, reported on August 13 from Washington, President and CEO of the Federal Reserve Bank of New York―William Dudley said if the Chinese economy is weaker than the authorities expected, then adjustment of the RMB exchange rate may be an appropriate move. This is the first public response from a senior Fed official regarding the exchange rate adjustment of the Chinese yuan.
At an event in New York, Dudley said if the Chinese economy underperforms the expectations of the Chinese authorities, the adjustment of RMB exchange rate may not be inappropriate. He also pointed out that what happens in China is of great significance for the rest of the world. China has huge influence on other countries’ demand and it also plays a decisive role in commodity pricing. However, it is still too early to draw a conclusion on what the effect will be of China's RMB devaluation.
The People’s Bank of China (PBC) announced the devaluation of the Chinese yuan last week. The PBC said in a statement on its official website, that starting from August 11, the central bank will begin to set the yuan's central parity rate against the greenback based on market-based quotes, and the previous trading day's closing level to better reflect market forces.
Analysts believe that PBC's reform measures are conducive to further marketizing the exchange rate of the Chinese yuan. The volatility of RMB exchange rate is controllable and has very limited impact on the international foreign exchange market.