China will widen the floating band of yuan against U.S. dollar for daily spot trading on the interbank market from 0.3 percent to 0.5 percent as of May 21, the People's Bank of China, or the central bank, announced on Friday.

"The higher flexibility indicated that the fluctuations of yuan will rely more on market forces. It's a good step forward in the correct direction, " said Zuo Xiaolei, an analyst with Galaxy Securities.

The central parity rate of yuan against US dollar has accumulatively appreciated by 5.54 percent since July 21, 2005, when China scrapped the yuan-dollar peg amid drastic currency reforms.

"The new move will also be conducive to containing inflow of speculative money and to mitigating pressure on yuan to appreciate more quickly," said Zuo.

As a related measure against inflow of hot money, the State Administration of Foreign Exchange has since April been carrying out a special campaign to scrutinize inrush of foreign currencies in 10 coastal provinces and cities. They are Guangdong, Jiangsu, Zhejiang, Shandong, Fujian, Liaoning, Ningbo, Qingdao, Xiamen and Dalian.

"These regions boast most speculative money flowing from abroad in the country. The check-up in the areas will be able to improve transparency of capital inflow," said Tan Yaling, a researcher with the global financial market department of the Bank of China.

Sources with the administration said Friday that one of the major tasks for foreign exchange control at the present time is intensifying regulation over inflow of hot money.

Source: Xinhua