New | Chinese Officials Back Yuan as Pimco Says It’s Going to Fall

Chinese officials are voicing support for their tumbling currency and intervening to bolster it just as Pacific Investment Management Co. (PIMCO) says the yuan is poised to fall further.

Bets against the yuan will fail and calls for a large decline are “ridiculous,” said Han Jun, the deputy director of China’s office of the central leading group for financial and economic affairs. Another official said investors misunderstood central bank currency shifts last week that sent the yuan down.

Pimco is betting the dollar will rise against its Chinese counterpart, said Luke Spajic, a portfolio manager in Singapore for the US$1.47 trillion (HK$11.40 trillion) money manager. “We believe the bullish trend of the US dollar will remain intact and that the changes made to the Chinese currency regime portend additional scope for the yuan to weaken over the next six to 12 months,” he said in a report issued Tuesday in Asia.

The divergence highlights the challenge investors face in interpreting China’s decision to reduce the yuan’s fixing rate last week, a move that sparked speculation officials felt compelled to implement emergency measures to stem a slowdown in economic growth. The currency tumbled to the lowest level in almost five years against the dollar on January 7.

“It is pure imagination that the Chinese yuan will act like a wild horse without any rein,” said Han, speaking in New York on Monday. Short selling -- or betting against the currency -- “will not succeed.” Policy makers are determined to ensure yuan stability, he said.

Investors misunderstood the People’s Bank’s intentions, Ma Jun, chief economist at the PBOC’s research bureau, said in comments Monday on the central bank’s website.