The Chinese yuan’s foreign exchange rate has been volatile in October . Analysts say the fluctuations are normal and investors should not overreact.

But for developing Asia, there should be a safety net to guard against the threat of possible capital flight.

The Chinese yuan has been volatile in October. In 10 trade sessions, the yuan’s midpoint set by the central bank dropped seven times against the US dollar, and climbed up in three sessions.

Economists say the two-movement is due to the mysterious and yet everyday force.
 
"...Market forces. managed flow. more often than one and half years ago. US dollar strength, not RMB weakness. not depreciated...." Jurgen Conrad, economic unit head of Asian Development Bank China Resident Mission said.

Here at the Asian economic and financial cooperation seminar in Beijing, officials and experts are focusing on closer ties in the region, which consists mainly of emerging economies like China.

Conrad said one currency's strength is fundamentally determined by its economic power and growth rate very high, foreign exchagne rate eventually strengthens"

Foreign exchange rates fluctuation is seen as market norms, and there will be a number of factors impacting the movement. Both internal and external.

"There is a variety of uncertainties in the market. Not only the US Federal Reserve's rate hike, issues in Europe, geopolitical disputes, but also for emerging economies, their risks may be exposed during this low-growth period." Guan Tao,senior research fellow of China Finance 40 Forum.

Guan said the capital inflows and outflows are reflected in fluctuations in the foreign exchange rate .For China, the recent capital outflow is not speculative funds.

Conrad said:"...Capital outflow not hot money, but outbound foreign investment.... "

But as global central banks keep printing money, experts say there is a chance that capital movements could hit emerging economies, and they are guarding against the possible threat.

Guan Tao said: "We have set up Chiang Mai initiative, which has evolved from bilateral deals to multi-lateral agreement on currency swap. In the wake of capital flight hits, we now need to analog this situation, and check this mechanism, to see if there are problems need solving."

The Chinese central bank has signed a series of agreements with regional countries, enabling China to swap certain amount of currencies with its partners at a certain time, with a certain exchange rate.

Analysts say this could also be a buffer against capital flight. As global economic growth remains uneven, Asia is looking to firm its connectivity to fight against external risks.