The band has been gradually increased to plus or minus 2 per cent by There are also signs that the PBOC has been increasingly using explicit communication with the public rather than direct intervention to influence the exchange rate.
These market-oriented reforms will render the RMB exchange rate more flexible but less predictable. Recent research finds empirical evidence that public information flows have persistent and significant impact on RMB volatility dynamics. With the market-oriented reform furthered and the managed floating exchange rate regime improved, the RMB exchange rate is expected to become more volatile. It will aim at dampening extreme exchange rate volatility and use the exchange rate as an automatic stabiliser to adjust the macro-economy and the balance of payments.
East Asia Forum welcomes comments, both for adding depth to analysis and for bringing up important new issues. The pace of appreciation will slow — but the legacy is likely to prove long-lived. It offers investors a positive interest rate and the prospect of some currency gain. The economy expanded 4.
The risk for is that, as the Covid effect fades, market participants could cease to regard the renminbi as a one-way bet and the currency could fall again as it did in and In tandem with this foreign currency fund-raising, the PBoC has been enacting measures since August to boost allocation of renminbi assets to foreign investors.
A well-functioning liquid domestic bond market is a prerequisite for further currency internationalisation — an area where China has much ground to make up. One setback causing headaches has been a series of bond defaults in recent weeks by state-owned companies, although this is part of an effort to strengthen governance among Chinese issuers.
But worries about uneven euro area recovery, negative interest rates, European Central Bank power struggles and unsteady European recovery fund progress will hamper any advance against the dollar. Meanwhile, a stronger currency relative to the dollar has its advantages. It lowers the costs of the commodities and other primary materials denominated in dollars as the economhy reopens, helping offset inflationary pressure on domestic prices from rising prices for petroleum and industrial products, Weinberg said.
After all, such moves are rare. In particular, the use of the yuan along the Silk Routes for financing infrastructure and transacting trade has boosted its value and will continue to do so.
Negative headlines have come in rapid fire for the company in recent weeks—and it dramatically missed sales estimates for the third quarter. Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil. A stronger yuan makes Chinese goods relatively more expensive to buyers overseas, and has spurred concerns about the competitiveness of Chinese exports — a major contributor to national economic growth.
The Chinese yuan traded little changed against the U. That marked the second-straight day of weaker fixings, reversing six straight trading days of stronger fixings since May 24, according to data from Wind Information.
The PBOC has tried to allow the market to play a greater role in deter mining the yuan's exchange rate. The hike forces banks to retain more of their foreign currency holdings, reducing the amount that could be used to influence foreign exchange rates.
It is the first such hike in 14 years since the previous change in May — before the financial crisis — economists pointed out. Analysts said the exact dollar amount is less significant than the central bank's message that the yuan will not move in a single direction of continued strengthening against the U.
He pointed out the size of the adjustment is relatively large, and said it represents a form of targeted monetary policy tightening. The ratio increase will limit speculative activity since financial institutions need to keep more money in their reserves, Xu said.
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