Central bank to adjust float range of RMB exchange rate at proper time

China will adjust the float range of its currency exchange rate at proper time according to the market situation and economic and financial circumstances, said a report released on Thursday by the People's Bank of China, the country's central bank on the monetary policy in the second quarter this year.

According to the domestic and international economic and financial circumstances, the central bank will manage yuan's exchange rate on the basis of market supply and demand and with reference to a basket of currencies, so as to maintain the yuan's basic stability at a reasonable equilibrium, keep the basic balance of international payment as well as safeguard the stability of macro-economy and financial market.

After China abruptly allowed its currency, the yuan, to appreciate by a modest 2 percent on July 21, the trading price between US dollars and yuan can be fluctuated within 0.3 percent in inter-bank foreign exchange market, and the trading price between non-US dollars and yuan can be fluctuated within 1.5 percent.

"A revaluation of Renminbi by 2 percent, effective in the beginning of the exchange rate regime reform, does not in the least imply an initial move which warrants further actions in the future," the central bank announced solemnly.

The reform of the RMB exchange rate regime has been proceeded in an active, controllable and gradual way, the central bank said. "Gradualism" is the principle applied in the reform of the RMB exchange rate regime, rather than in the adjustment of the RMB exchange rate, it said.

"The reform is focused not on the quantitative adjustment of the RMB exchange rate but on the improvement of the RMB exchange rate regime."

So as to further improve the RMB exchange rate regime, the central bank proposed five tasks including continuing to explain principles, contents and goals of the exchange rate reform to the public, following the market responses and improve the regulatory mechanism of Renminbi exchange rate, developing foreign exchange market and providing clients with more risk-avoiding financial means, continuing to improve all kinds of corresponding measures and establishing market mechanism for adjusting international payment.

When the central bank appreciated the RMB last month, it announced its exchange rate will not float by a big margin, aiming apparently to ward off speculative activities betting on the yuan's further jumps.

Big ups and downs of the exchange rate are not in line with the fundamental interests of China since such fluctuation will pose a fairly big threat against the country's economic and financial stability, the central bank said.

Source: Xinhua