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China reported ready to widen yuan's trading range

Section: Daily Dispatches

From AFX News via Forbes
Tuesday, August 29, 2006

SHANGHAI -- China's central bank may widen the daily trading band of the yuan against the dollar to increase the flexibity of its exchange rate, the China Securities Journal reported in a front-page story, citing analysts.

Currently, the People's Bank of China allows the currency to move 0.3 percent on either side of the central parity set before start of trading every day.

A wider trading band would allow for more room of appreciation in the yuan and help ease the problem of excess liquidity, according to the paper.

More flexibilty in the yuan exchange rate will also increase the costs of speculation and dampen expectations of an upward move in the currency, it added.

The yuan ended at 7.9622 to the dollar on the over-the-counter (OTC) market yesterday, compared to a close of 7.9709 in the previous day.

It hit 7.9600 yuan against the dollar yesterday on the auto-matching exchange-traded market, the strongest level for the currency since the revaluation in July 2005

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