China widens yuan trading band Vs dollar

Beijing: China`s central bank has said it will widen the trading limit of its currency yuan against the US dollar to 1 per cent from next week.

In the foreign exchange spot market, Chinese banks can exchange the yuan 1 per cent above or below the central parity against the dollar announced by the China Foreign Exchange Trading System each trading day, the People`s Bank of China said.

Earlier, the daily trading limit was set at 0.5 per cent. China`s current foreign exchange market is developing more maturely and trading entities are more capable of pricing independently and managing their risks, state run news agency Xinhua quoted the bank statement as saying.

Adjusting to the demand of market development, widening of the yuan`s trading band aims to promote the price discovery of the exchange of renminbi, boost the yuan`s two-way fluctuation flexibility and improve the market-based managed floating exchange rate regime tied to a basket of foreign currencies, the central bank said.

It added that it will maintain the "normal fluctuation" of the yuan`s exchange rate, stabilise the rate at "reasonable and balanced levels", and keep the macro economy and financial markets stable.

The central parity rate of the yuan against the US dollar is based on a weighted average of prices before the opening of the market each business day.