PBOC: China should expand Renminbi's trading band

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China should decrease government intervention in the currency market and broaden the Renminbi's trading band as the next step for revamping the country's foreign exchange mechanism, said the central bank's official newspaper on Wednesday.

Currently the exchange rate is allowed to rise or fall two percent from a daily midpoint rate set by the People's Bank of China (PBOC) each morning.

The Financial News said more trading tools, diversified transaction methods and lower transaction cost are required in a bid to improve forex trading.

People's Bank Of China (PBOC) headquarters in Beijing, China, on May 14, 2017. /VCG Photo

The front-page article by the PBOC news outlet signaled the possibility of them loosening its grip on the currency, adding teeth to a promise that China would allow market forces to play a greater role in the economy and its markets.

This move could also be a sign of confidence that regulators believe the economy is stable enough to handle more promised reforms going forward.

The Renminbi’s trading range was last widened in March 2014 from one percent.

Unlike the onshore Renminbi (CNY), the offshore Renminbi (CNH) is allowed to trade freely on foreign currency markets.

Yet due to PBOC’s massive influence, this rate tends to stay within close range of the domestic CNY rate.

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