China's central bank has widened the yuan's trading band against the euro, yen and Hong Kong dollar, another step toward currency flexibility ahead of weekend finance meetings expected to bring some heat on the Chinese leadership.
The People's Bank of China said in a statement that it has widened the yuan's trading band against non-U.S. dollar currencies to 3% from 1.5%.
Daily yuan-dollar trading in the interbank market remains unchanged at 0.3%.
Here's an interesting bit:
China said the move came to counter speculative currency market moves that would work against an appreciating yuan.
"Gradually the (People's Bank of China) will carry out fewer and fewer interventions in the foreign exchange market and let the market decide," Hu Xiaolian, deputy governor at the central bank, told the publication "Emerging Markets"...
But Hu, who is also China's foreign exchange chief, added: "We think it's still an open question as to whether the (yuan) exchange rate is undervalued."
"We can't expect the move will change the activity or strategy of the (central bank) in the foreign-exchange market overnight," Hu told the publication.
She said China still needed to take steps to ensure speculative inflows do not destabilize the economy.
"We should first further develop our capital markets and other domestic institutions, to better use our domestic market to finance business," she said. "We have to implement all kinds of control on this hot money. We have to keep our watch on capital inflows."
"We've repeated this many times: a stable exchange rate is in China's best interest," Hu said.