Yuan unlikely to see steep devaluation

Effective Thursday, China's central bank cut the reserve requirement ratio (RRR) for all commercial lenders by 50 basis points. According to reports, this reduction is the first of its kind since May 2012.

As GDP expansion decelerates, many had been expecting action from the central bank to counter the loss of momentum.

Yet, the country's latest RRR reduction was made mainly in response to international factors. In January, the central bank of Switzerland announced that it would no longer peg the franc's exchange rate against the euro. This apparent loss of faith in the euro sent shock waves through the global market. Conditions have only become more volatile thanks to benchmark interest rate cuts by central bankers in India, Canada and Russia.

As global shifts weigh on Chinese policymaking, what effect will this have on its currency? After the latest RRR cut, will the yuan depreciate?

In truth, there are many factors which might devalue the renminbi. China's central bank appears committed to maintaining a stable yuan. While the currency might experience short-term fluctuations, sustained depreciation is unlikely.