The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental forces. It will have to continue to intervene on a large scale in the short term to shift market perceptions that the renminbi is a one-way bet but given the still-high level of reserves it can do so for a long time yet.
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