In the face of a formidable US dollar, China's central bank governor, Pan Gongsheng, reaffirmed the nation's commitment to preventing the excessive fluctuation of its currency.

Addressing the Asian Financial Forum in Hong Kong on Monday, Pan emphasized the strategic importance of maintaining the yuan's general stability against the backdrop of depreciating non-US currencies.

With the yuan under pressure from a high US dollar index, Pan highlighted its resilience and asserted the central bank's ability to preserve market stability.

'We will rectify pro-cyclical market behavior, firmly address actions that disrupt market order and steadfastly prevent the risk of the exchange rate overshooting, ensuring that the yuan exchange rate remains generally stable at a reasonable, balanced level,' Pan stated.

Supporting the People's Bank of China's commitment, the central bank announced an increase in the macro-prudential adjustment parameter for cross-border corporate and financial institution financing.

By raising this parameter from 1.5 to 1.75, authorities aim to facilitate more overseas borrowing, thereby boosting onshore dollar liquidity and supporting the yuan against the dollar.

Further demonstrating its commitment to stabilize the yuan, the central bank also planned to issue 60 billion yuan ($8.18 billion) worth of central bank bills in Hong Kong.

This move is part of a broader effort to manage the offshore yuan effectively.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, noted, 'In a short period, regulators have repeatedly sent the policy signal of yuan stabilization, aimed at preventing any excessive accumulation of short-term depreciation expectations.' Wang suggested that regulators could leverage macro-prudential management and foreign exchange reserve adjustments to curb capital outflows and support dollar liquidity.

The emphasis on foreign exchange market supervision was echoed by the China FX Committee, which underscored the need to swiftly counteract behaviors that disturb market order.

The Committee urged participants to avoid contributing to pro-cyclical trends.

The yuan demonstrated modest gains against the dollar on Monday, trading at 7.3320 per dollar, a slight strength from Friday's close, according to data from Wind Info.

Last week's events saw the yuan at its weakest since September 2023, partly due to differing interest rate trajectories between China and the US.

Zhong Zhengsheng, chief economist at Ping An Securities, pointed to steady economic growth as the fundamental driver for yuan stability.

'Market anticipation is directed towards proactive countercyclical adjustments and the synchronization of fiscal and monetary policies to bolster confidence and economic momentum,' he remarked.

Pan Gongsheng further pledged to navigate the economic trajectory through strategic tools that maintain an accommodative financing environment.

By enhancing the decisive role of market forces in exchange rate formation, China aims to safeguard its macroeconomic equilibrium and balance of payments, with initiatives like increasing the share of foreign exchange reserves allocated in Hong Kong.