PBOC Widens Yuan’s Daily Trading Band

People’s Bank of China decided on March 15th, 2014 to widen the trading band, allowing the Yuan to fluctuate by 2 percent from the parity daily, up from the previous 1 percent target. The decision, effective from March 17th aims to enable the market to play its roles and make the Yuan a freer currency.

Excerpt from the announcement by the People’s Bank of China:

The foreign exchange market is developing in a sound manner and the market participants are increasingly strengthening their pricing and risk management capacities. In order to meet the demand of market development, give market a bigger role in exchange rate pricing, and build a managed floating exchange rate regime based on market supply and demand, the PBC has decided to expand the floating band of the exchange rate of RMB against US dollar on the foreign exchange.

Effective from 17 March 2014 onwards, the floating band of RMB against US dollar on the inter-bank spot foreign exchange market is enlarged from 1 percent to 2 percent, i.e., on every trading day on the inter-bank spot market, the trading prices of RMB against U.S. dollar will fluctuate within a band of ±2 percent below and above the central parity as released by the China Foreign Exchange Trade System on that day. On each business day, the spread between the RMB/USD buying and selling prices offered by the designated foreign exchange banks to their clients shall be within 3 percent of the published central parity of US dollar on that day, instead of 2 percent.

The PBC will continue to prove the market-based RMB exchange rate regime, continue to enable the market to play its roles, enhance the flexibility of RMB exchange rate in both directions, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level.

PBOC Widens Yuan’s Daily Trading Band

Joana Taborda | joana.taborda@tradingeconomics.com
3/17/2014 10:01:45 AM