China to widen yuan trading band after launch of market makers - govt advisor
Tuesday, August 23, 2005 12:04:45 PM
afxpress.com
BEIJING (AFX) - China will widen the yuan trading band after the launch of a market-making system and foreign exchange futures and options, a senior government advisor said in an interview with the official Xinhua news agency
"Only after these things have been done, can (we) expect the yuan trading band to be widened," said Li Yang, a senior researcher at the Chinese Academy of Social Science and former member of the central bank's monetary policy advisory committee
The report said the central bank is planning to launching market makers in yuan-US dollar trading, but offered no further details
Li said the trading band will be widened gradually and that the exchange rate will be kept stable for the benefit of domestic companies. "There won't be any drastic changes," he said
But he ruled out any major fluctuations in the exchange rate in the short term
Li also said that China does not need to disclose the detailed contents and weightings of the currency basket, because they are only used as a reference point
"It makes the others guess, giving the Chinese monetary authorities full control," he said
He said that under the new mechanism, the People's Bank of China (PBoC) can make adjustments "at any time and under any conditions", thereby allowing the government to decide what the exchange rate should be. PBoC governor Zhou Xiaochuan said earlier this month that the US dollar, Japanese yen, euro and Korean won constitute the bulk of the currency basket and said that others, including the Canadian dollar and British pound, are also factored in, but did not reveal weightings. After months of intense US pressure, China on July 21 freed the yuan from it 11-year-old peg to the US dollar in favor of a trade-weighted basket of currencies and allowed the local unit to appreciate 2.1 pct
However, the yuan trading band was then maintained unchanged at 0.3 pct and the central bank only said it would adjust the yuan trading band at the proper time. |
