(Yicai Global) May 28 -- The Chinese yuan's two-way fluctuations are normal, the central bank said after the currency hit the strongest level in nearly three years against the US dollar. It kept on moving in the same direction.

The unpredictability of the exchange rate is inevitable in the short, medium, and long-term, the People’s Bank of China wrote in a document on its website yesterday.

The statement marks the third time that Chinese regulators have been sharing their insights about the renminbi's forex rate in the past seven days. Yesterday, the yuan moved to the firmest level against the greenback since June 2018. The rate kept on appreciating to a one-year record today.

Speculation Is Unwarranted

The latest statement will help market participants avoid making rash decisions based on misunderstandings while cutting their losses, Zhao Qingming, an international financial expert, said to Yicai Global.

Huge short-term fluctuations will easily trigger speculation and cross-border inflows, interfering with financial order, said Zhou Maohua, an analyst at the financial markets department of Everbright Bank.

China will resolutely crack down on market manipulation and spreading malignant unilateral expectations, the PBOC added.

Managed Floating System

The exchange rate cannot be used as a tool to stimulate exports by depreciation, neither can it be used to offset the influence of commodity price hikes based on the current system, said the central bank.

The managed floating exchange rate system is based on market supply and demand, said the lender. The system is adjusted by referring to a basket of currencies, it added. The regime is in line with the current situation and should be adhered to in the long run, the PBOC noted.

China should further promote market-oriented reforms of its interest and foreign exchange rates to maintain order, a financial stability committee under the State Council said during a conference held on May 21.

The PBOC will guide market expectations and work as an automatic stabilizer of the balance of payments to keep the yuan's forex rate at a reasonable and balanced level, Liu Guoqiang, deputy governor of the PBOC, said on May 23.

Editor: Emmi Laine, Xiao Yi