A clerk counts 100 Chinese yuan banknotes at a branch of China Merchants Bank in Hefei yesterday.
SHANGHAI: China’s yuan weakened against the dollar yesterday after the central bank doubled the trading band for the currency, which the United States has long insisted is undervalued.
The People’s Bank of China (PBoC) said on Saturday it would allow the yuan to move up or down 2 percent daily —double the previous 1 percent — on either side of a mid-point set under the guidance of the bank, which says it polls market makers.
The yuan ended at 6.1780 to the dollar yesterday, the first trading day after the reform, compared with Friday’s close of 6.1502, according to the China Foreign Exchange Trade System.
Analysts said the long-waited financial reform would introduce greater volatility in trading on the national foreign exchange market, but stressed the central bank could still exercise control over the yuan.
Policymakers have pledged to move gradually towards full convertibility of the yuan — also known as the renminbi — allowing it to be freely bought and sold, and bringing with it the uncontrolled movement of funds in and out of China.
The US government said in October that the yuan remained undervalued despite appreciating last year and called on Beijing to disclose more about its market intervention. But the US Treasury stopped short of officially branding China a “currency manipulator”, a designation that could spark sanctions by Washington.
The yuan steadily appreciated against the dollar in 2013, rising more than 3 percent.
“We view this move as another major step in the direction of allowing the market to play a more important role in exchange rate setting,” investment bank Goldman Sachs said in research note released yesterday.
But it added: “If the PBoC wish they can still move the rate in the direction they want, since this band only affects how much (the) rate can move intra-day.”AFP
