Commerce ministry: Do not hype yuan fluctuation

China's commerce ministry spokesman said on Tuesday that people should not hype the recent downward movement in the value of the Renminbi, or the yuan, against the U.S. dollar. In response to a question about whether the yuan's recent depreciation is a result of government intervention, Shen Danyang said, "We should look at this with a more rational attitude rather than reading too much into it." The yuan's value came under the spotlight as its exchange rate against the U.S. dollar declined 0.4 percent in the first two months this year, a period in which the country also saw a shrinking trade surplus. "People should put the yuan's recent depreciation in the wider context of China's reform of its currency's exchange rate formation mechanism," Shen added at a press conference held in the ministry. China's central bank widened the yuan's daily trading band from 1 percent to 2 percent on Monday. The move aims to enhance the floating flexibility of the Renminbi exchange rate, make capital allocation more efficient, facilitate economic restructuring and beef up the decisive role of market in allocating resources, the People's Bank of China said in a Saturday statement. From the launch of the yuan's exchange rate reform in 2005 to the end of last year, the currency has appreciated by 35.75 percent against the U.S. dollar, resulting in the currency's "effective" exchange rate rising 42.21 percent, according to Shen. "We hold that the recent moves of the Renminbi are more a result of the market impact. Compared with the currencies of some emerging economies, the yuan's recent fluctuations remain in a normal range," he said. Even though the yuan has depreciated against the U.S. dollar in face value in recent months, that is not the whole picture, the spokesman stressed. He pointed to the "real effective exchange rate" (REER), the weighted average of a country's currency relative to a basket of other major currencies adjusted for the effects of inflation, as a more accurate reflection of the real value of a currency in international trade. The yuan's REER, which is calculated by the Bank of International Settlements, has actually kept rising early this year, jumping 2.03 percent in January, according to the spokesman. Shen also stressed the importance of maintaining consistent and predictable policies in this area, saying the ministry will work to help achieve this goal. The ministry will also work to expand the use of the Renminbi in the international economy and trade to reduce exchange rate risks for enterprises, Shen said.