UPDATE 1-China must avoid yuan over-adjustment -c.bank

Published 10/18/2010, 09:29 PM
Updated 10/18/2010, 09:32 PM

* China must minimise negative impact of yuan reform

* Currency adjustment must be gradual -c.bank spokesman (Adds quotes, background)

BEIJING, Oct 19 (Reuters) - China must ensure its currency moves in a controllable manner and not become over-adjusted in response to market forces, the official People's Daily cited a central bank spokesman as reporting on Tuesday.

Adjustments in the value of the yuan must satisfy China's own economic need and not hurt domestic firms' competitiveness in global markets, the spokesman added in remarks published in the overseas edition of the Party newspaper.

"We must try to minimise any possible negative impact in further exchange rate reform," the spokesman was paraphrased as saying by the newspaper.

"We must make sure that the currency movements are controllable and avoid any possibility of over adjustment of the yuan exchange rate driven by market forces," the spokesman added.

The comments, in line with China's official stance, were part of an article in the People's Daily asserting that there is no grounds for substantial yuan appreciation.

China has allowed its currency to gain at a faster pace in recent weeks after depegging it from dollar in June.

The United States and Europe accuse China of keeping the yuan low to boost exports, undermining jobs and competitiveness in Western economies. (Reporting by Langi Chiang and Simon Rabinovitch; Editing by Ken Wills)

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