Volatile fluctuations in yuan’s exchange rate to be avoided: PBOC

China's central bank said it will keep the RMB exchange rate at a reasonable and balanced level, and fend off risks of excessive movements, in its second quarter monetary policy report published on Thursday.

The country will adhere to a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies, said the People's Bank of China (PBOC).

The RMB exchange rate has seen two-way fluctuations but remained generally stable this year. The Chinese yuan, despite dropping below seven yuan per U.S. dollar in May, picked up again by 1.3 percent in July.

The PBOC added that real estate market policies will be optimized in a timely manner to ensure the steady and healthy development of the sector.

Efforts will be made to coordinate financial support to help defuse local debt risks and promote the reform of small and medium-sized financial institutions to prevent systemic financial risks, it said.

The central bank expects a gradual rise in inflation starting from August and reiterated that there is no long-term deflation or inflation basis in the country as aggregate supply and demand is generally balanced, monetary conditions reasonable and moderate, and residents' expectations stable over the mid-long term.

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