In the aftermath in the recent surge in China’s renminbi volatility which saw it plunge at the fastest pace in years, many, us included, suggested that the immediate next step in China’s “fight with speculators” (not to mention the second biggest trade deficit in history), was for the PBOC to promptly widen the Yuan trading band, something it hasn’t done since April 2012, with the stated objective of further liberalizing its monetary system and bringing the currency that much closer to being freely traded and market-set. Overnight it did just that, when it announced it would widen the Yuan’s trading band against the dollar from 1% to 2%.
The PBOC’s overnight release:
The healthy development of China’s current foreign exchange market, trading body independent pricing and risk management capabilities continue to increase. To meet the requirements of market development, increase the intensity of market-determined exchange rate, and establish a market-based, managed floating exchange rate system, the People’s Bank of China decided to expand the foreign exchange market, the floating range of the RMB against the U.S. dollar, is now on the relevant matters are announced as follows: >> Read More