China central bank under pressure to weaken yuan further

12-Aug (Reuters) — China’s move to devalue its currency reflects a growing clamor within government circles for a weaker yuan to help struggling exporters, ensuring the central bank remains under pressure to drag it down further in the months ahead, sources said.

The yuan has fallen almost 4 percent in two days since the central bank announced the devaluation on Tuesday, but sources involved in the policy-making process said powerful voices inside the government were pushing for it to go still lower.

Their comments, which offer a rare insight into the argument going on behind the scenes in Beijing, suggest there is pressure for an overall devaluation of almost 10 percent.

“There have been internal calls for the exchange rate to be more flexible, or depreciated appropriately, to help stabilize external demand and growth,” said a senior economist at a government think-tank that advises policy-makers in Beijing.

“I think yuan deprecation within 10 percent will be manageable. There should be enough depreciation, otherwise it won’t be able to stimulate exports.”

[source]