The central parity rate for yuan against US dollar rose to new high on Monday, the first trading day when the daily floating band for the spot rate in the interbank foreign exchange market is expanded.

 

The central parity rate for the yuan, also known as Renminbi (RMB), reached 7.6652 to one US dollars on Monday, gaining 152 basis points from Friday's reference rate of 7.6804 to the hard currency.

 

The yuan has climbed 1,435 basis points from 7.8087 yuan to one US dollar posted on the last business day of 2006.

 

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

 

The new move will be conducive to growth of forex market, making the yuan more flexible, enhancing the strength against risks of enterprises and financial institutions and sharpening their competitive edge, said the central bank. "The 0.5-percent-floating band is reasonable as exchange rates like US dollars against yen, or Euro against US dollars would fluctuate within this limit most of the time," said Lin Chaohui, senior researcher with Guotai Junan Securities.

 

"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 about 5.5 percent since July 21, 2005, when China scrapped the yuan-dollar peg amid drastic currency reforms.

 

(Xinhua News Agency May 21, 2007)