Source: CCTV.com

05-22-2007 11:11

Special Report:   2nd meeting of SED

The People's Bank of China, the central bank, has widened the yuan's daily floating band against the U.S. dollar on the interbank market from 0.3 to 0.5 percent. The yuan pushed to another new high against US dollar on the first day the widened band took effect on Monday.

The central parity rate for the yuan reached 7.6652 to one U.S. dollar on Monday, marking a new record high on the first trading day. The daily floating band for the spot rate in the interbank foreign exchange market is expanded. It has gained over 150 basis points from last Friday's reference rate of 7.6804 to the greenback.

The central parity rate of the yuan against US dollar has risen by about 5.5 percent in total since July 2005, when China scrapped the yuan-dollar peg amid drastic currency reforms.

It's the first time that the floating band has been widened since the 2005 reform. According to the Central Bank, the action will be conducive to the growth of the forex market, making the yuan more flexible, enhancing the strength against risks of enterprises and financial institutions and sharpening their competitive edge.

Experts say, a stronger currency would increase the cost of China's exports, reduce the nation's record trade surplus and cool economic growth, which was over 11 percent in the first quarter of this year. Meanwhile, the higher flexibility indicated that the fluctuations of the yuan would rely more on market forces and it's a good step forward in the right direction.

 

Editor:Li Yang