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Chinese Yuan Band Should Be Widened: PBOC Paper

Talking Points:

  • The People’s Bank of China’s newspaper has reportedly run a front-page story suggesting wider Yuan trading bands
  • Citing un-named experts, it also advocates reduced State intervention in currency markets
  • China is eager to avoid the “manipulator” tag

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China’s Yuan may have taken another baby step towards full convertibility Wednesday.

There’s been no widening of its trading band, but an article suggesting that China should consider such action in time, while reducing official intervention in the currency market, has reportedly made the front page of the People’s Bank of China’s official newspaper, Financial News.

The foreign exchange market needs “more players, more trading tools and diversified transaction methods,” the paper said, reportedly citing un-named “expert opinion.”

At present China permits its currency to move no more than 2% either up or down against a daily reference rate set by the central bank. The band was widened from 1% in early 2014, the last such widening. China is sensitive to accusations that it manages its currency to economic advantage. US President Donald Trump has threatened to label it a “currency manipulator,” a title which would bring with it economic consequences for Sino/US trade.

However, the President has so far held off from making good on this threat, and it is possible that Wednesday’s story represents some kind of response to that.

— Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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