Shanghai, May 29: China's yuan closed on Monday outside its usual trading band for the fourth time in a week, and the market's operator said the central bank was moving ahead with plans to widen the currency's tight range.Even a rate hike in foreign exchange deposits and loans by the Bank of China on Monday failed to put a damper on the surging local currency, which was underpinned by strong exports this year.The yuan closed at 8.2768 to the US dollar on demand from exporters, up from Friday's close of 8.2769. Dealers said there was no sign of intervention by the People's Bank of China, the central bank, which usually keeps the currency in a narrow band.
An official of the China Foreign Exchange Trade System, which runs the national foreign exchange market, said China was already effectively allowing the yuan to trade in a broader range.
But Beijing would continue to maintain the stability of the yuan as it widened the band, he said. "The fluctuations are already broader," the official said. "With stability as the prerequisite, China will explore how big the fluctuations can be." Officials from the People's Bank of China and the State Administration of Foreign Exchange declined to confirm whether the central bank was moving to widen the band.
"This is not unusual, it's a reflection of the market," said a central bank official in Beijing.
It was the fourth time since last Tuesday that the currency ended outside the thin trading band of 8.2770 to 8.2800 that the central bank steadfastly maintains.
Analysts said the unusual movements in the currency are a signal the bank is testing a wider trading range ahead of China's entry to the World Trade Organisation.
-- (Reuters)
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