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China Considers Expanding Yuan Trading Band

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Post by lexie Mon Mar 05, 2012 11:10 am

Mar 5, 2012 8:58 AM CT .

China Considers Expanding Yuan Trading Band

China may “appropriately” widen the yuan’s trading band to better reflect market supply and demand, Xinhua News Agency reported, citing People’s Bank of China Governor Zhou Xiaochuan.

Zhou said the yuan has gradually met the requirements to become more of a floating currency, Xinhua reported. As China improves its industrial structure and gradually reduces its trade surplus, the yuan is now moving “very close” to a “balanced level,” Xinhua reported in English, citing Zhou.

The Chinese yuan, also called the renminbi or RMB, has appreciated 31 percent since July 2005 when the government abandoned a peg to the U.S. dollar. The central bank announces a central parity for the yuan against nine other currencies every trading day and allows the yuan to strengthen or weaken by 0.5 percent from the rate every day.

“The RMB exchange rate has gradually met the requirements for greater floating,” Zhou told Xinhua in an interview at the annual parliamentary session. “The PBOC is considering that the yuan’s daily floating band could be increased.”

In today’s trading, the yuan declined to its weakest level in almost a month on speculation policy makers will slow appreciation as growth in Asia’s biggest economy decelerates. The central bank weakened the currency’s daily fixing by the most since November 2010, setting it 0.22 percent lower at 6.3121 per dollar.

Premier Wen Jiabao set an economic growth target of 7.5 percent for this year, the slowest since 2004, in a speech at the National People’s Congress in Beijing today. He also set an inflation target of 4 percent, unchanged from last year.



http://www.bloomberg.com/news/2012-03-05/china-considers-expanding-yuan-s-trading-band-xinhua-reports.html

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