China may widen trading band as yuan fluctuations rise
(AFP)
Updated: 2006-08-18 19:26 BEIJING - China's central bank
may widen the yuan's trading band amid rising economic pressures and as currency
fluctuations approach the daily limit, state media reports.
The China Securities Journal, one of the most authoritative financial
newspapers in the state-run press, reported the potential moves by the People's
Bank of China in a front-page story.
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A Beijing hoarding with a dollar sign. China's
central bank may widen the yuan's trading band amid rising economic
pressures and as currency fluctuations approach the daily limit, state
media reports. [AFP]
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The report said there was an urgent need to widen the trading band -- the
yuan is allowed to move 0.3 percent on either side of a daily mid-point set by
the central bank -- for a wide range of trade and economic reasons.
"China's trade surplus has hit record highs in the three consecutive months
to July, making the need to further expand the yuan trading band an urgent
matter," the paper said, citing an unnamed analyst.
China's trade surplus soared over 40 percent year-on-year to 14.61 billion
dollars in July, bringing the seven-month figure to 75.95 billion dollars, up
nearly 52 percent from the same period in 2005.
China's continually ballooning surplus is one of the biggest causes of trade
frictions with its trading partners.
The European Union, Japan and especially the United States claim that China's
weak currency gives Chinese exporters an unfair advantage and have repeatedly
called for Beijing to raise the value of the yuan.
The China Securities Journal added that "a wider trading band could also be
an effective way to ease the problem of excess liquidity".
"It could also curb speculative trading on the foreign exchange market," the
paper said.
The report comes at the end of a week that has seen the strongest
fluctuations in the yuan's trading band since it was introduced in July last
year when the government ended the currency's decade-long peg to the dollar.
The yuan ended at 7.9686 to the dollar in the over-the-counter market
Thursday, compared with close of 7.9885 the previous day.
It posted a record rise for a single day on both the over-the-counter and
exchange-traded market on Thursday.
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