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China mulls larger floating band for the yuan: PBOC governor

(Xinhua)

08:56, March 06, 2012

BEIJING, March 5 (Xinhua) -- The governor of China's central bank said here Monday that the country is considering "appropriately" widening the trading band for the RMB, or the yuan, to better reflect an exchange rate regime decided by supply and demand in the market.

Zhou Xiaochuan, governor of the People's Bank of China (PBOC), the central bank, spoke to Xinhua on the sidelines of the annual parliamentary session, which opened here Monday.

"The RMB exchange rate has gradually met the requirements for greater floating," Zhou said. "The PBOC is considering that the yuan's daily floating band could be increased."

Currently, China adopts a managed floating exchange rate regime that is tied to a basket of foreign currencies. The PBOC announces a central parity for the yuan against nine other currencies on every trading day and allows the yuan to rise or fall by 0.5 percent from the rate every day.

As China improves its industrial structure and gradually reduces trade surplus, Zhou said, the yuan's exchange rate is now moving "very closely" to a balanced level.

The yuan weakened 141 basis points to 6.3121 against the U.S. dollar on Monday.

The PBOC data showed that the Chinese currency had appreciated 5.1 percent against the U.S. dollar in 2011 in terms of the central parity rate.

Chinese Premier Wen Jiabao said in a government work report to the country's top legislature on Monday that China will improve the mechanism for setting the RMB exchange rate, make the two-way floating exchange rate regime more flexible, and keep the RMB exchange rate basically stable at an appropriate and balanced level.

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