(Yicai) Aug. 18 -- The Chinese yuan reversed its slide against the US dollar yesterday after the People’s Bank of China said that it is confident about its ability to ensure the long-term stable operation of the foreign exchange market.

The onshore yuan closed at 7.2896 against the US dollar at 16:30, with an appreciation of 207 basis points.Overnight it appreciated more than 100 bps to recover all the ground it had lost during trading hours.

The offshore yuan was trading at 7.3115 against the greenback at the same time today with depreciating 87 basis points after strengthening more than 300 basis points yesterday and erasing the earlier losses that day.

The PBOC and the State Administration of Foreign Exchange are confident, qualified and capable of safeguarding the stable operations of the forex market, the central bank said in its monetary policy report for the second quarter released yesterday.

The redback will not keep falling, but will continue to move in both directions, the PBOC said. Although the exchange rate in the short-term will be unpredictable due to numerous external and internal factors, in the long run, rates depend on economic fundamentals. The yuan exchange rate has not deviated from the fundamentals and the forex market is operating as normal, it added.

The yuan has weakened past the psychologically important exchange rate of 7 three times in the past few years, and each time it has recovered and appreciated to below 7.

The PBOC and SAFE have a wealth of experience and plenty of policy tools at their disposal, the central bank said. The two government bodies will continue to keep the yuan exchange rate at a reasonable and balanced level, take measures to steady expectations and ensure balanced supply and demand in the forex market so as to prevent the exchange rate from overshooting.

Editor: Kim Taylor