For the yuan to be included in the worldwide Monetary Fund’s (IMF) basket of reserve currencies, known as the Special Drawing Rights or SDR, reforms which make the setting of the yuan’s value more market-determined and transparent are widely believed to be needed.

It finished the week at 6.3918 yuan per dollar, 0.1% stronger than the fixing of 6.3975, according to China Foreign Exchange Trade System prices.

Sentiment on the dollar remained fragile as investors pushed back expectations for the Fed to hike interest rates in September as the decline in the yuan fueled concerns over global inflation expectations and the outlook for growth in China.

The renminbi devaluation is worrisome, not because it represents an unwelcome move by the Chinese government, but rather because it reflects a weakness in the world’s second largest economy at a time when the world economy itself is showing few signs of strength. “The central bank has the power to maintain the stability of the renminbi and to ensure that it remains at a reasonable and balanced level”, Zhang Xiaohui, assistant governor of the PBoC. told the press.

“If the yuan weakens by 10 percent, what happens to the Hong Kong dollar?”

“What happens when the bad news comes out?”

However, the PBoC now appears to be moving to stem the slide and calm jittery markets.

The spot market opened at 6.3990 per dollar and changed hands at 6.3918 at market close, only 72 pips from the previous close and 0.09 percent away from the midpoint. But shares in Asia rose after the Chinese central bank’s assurances. In offshore trading, the yuan had fallen even more dramatically in previous days, to trade at a discount of more than 2 percent to the onshore rate, but gained ground against the dollar on Thursday to narrow that discount.

The PBOC has just announced the yuan’s fixing level for Friday, and it’s stronger than where it closed yesterday.

The People’s Bank of China (PBoC) stunned global markets on Tuesday by suddenly allowing the currency to fall by almost 2% after a run of poor economic data.

The rest of the Asian economies, meanwhile, will be forced to match China’s initiative to preserve and improve its exports market.

It was not very unexpected because this was an easy tool the authorities could use, though they had not made much use of it in the past. He also said China is not going to devalue the yuan any further to support the export industry.

“This is complete nonsense, completely without basis”, he said.

“China does not have the need to start a currency war to gain advantage”, he was quoted as saying by the official Xinhua news agency.