If major world economies' policy tightening leads to excessive currency market fluctuations, China's foreign exchange regulator said that counter-cyclical measures will be used at the appropriate moment.

"If the foreign exchange market has relatively large fluctuations," Wang Chunying, a spokesperson for the State Administration of Foreign Exchange stated, "regulators would implement counter-cyclical adjustments at the right moment."

She said that the regulator would closely monitor inflationary pressures in the US as well as the Fed's rate of monetary policy tightening in order to make proactive changes to guide market expectations and maintain currency market stability.

"Markets have completely priced in the pace of the Fed's plan to decrease asset purchases, and the risks of causing short-term market turbulence are manageable," Wang added.

Wang Chunying – Asia Times

The change in policy at global central banks will not affect the generally stable state of China's balance of payments or the yuan currency's trend, she noted.

The Chinese currency's recent strength, which broke through a critical threshold of 6.4 yuan per dollar to achieve a four-month high this week, was normal and driven by market forces, according to the regulator.

"This year, the yuan moved in both directions and had two-way volatility, but it remained generally stable," Wang added.

"The yuan exchange rate will continue to be based on economic conditions at home and abroad, the balance of payments, and movements in global FX markets," Wang said, adding that a sustained appreciation or depreciation of the yuan was unlikely.

To prevent any significant one-way bet on the yuan, the FX regulator had previously adjusted the counter-cyclical factor in the yuan midpoint fixing formula, banks' FX reserve requirement ratio, and FX risk reserve ratio for future contracts.