China Set To Broaden RMB Yuan Trading Band Soon
China may broaden the daily trading band of Renminbi (RMB), or the Yuan, Vs the USD soon, another step in its exchange rate reform.
The range is likely to be expanded to 3% from the existing 2% in Q-3, Zhu Haibin, chief economist of JP Morgan China, said in a research note.
The State Council announced on 24 July that it will broaden the RMB Yuan daily trading band but did not disclose any details.
Chinese banks can exchange yuan on the foreign exchange spot market at 2% above or below the central parity rate Vs the USD announced by the China Foreign Exchange Trading System each trading day.
The RMB exchange rate on the spot market may “depreciate modestly in the short term after the band widening and it will hover around 6.30 Vs the Buck by the end of this year,” Zhu predicted.
The central parity rate of the RMB Yuan stood at 6.8058 Vs the USD Monday, according to the China Foreign Exchange Trading System.
China has taken a gradual and steady pace in raising its currency’s daily trading limit, from 0.3% in Y 1994 to 0.5% in Y 2007 and 1% in Y 2012 to the latest 2% in Y 2014.
By Song Miou
Paul Ebeling, Editor
HeffX-LTN
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