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Fluctuation of RMB exchange rate remains well below cap
Latest Updated by 2006-08-08 11:16:10
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Recent daily fluctuations of the Renminbi (RMB)'s exchange rate has widened but remains well below the government-imposed cap on daily moves of the currency, the Xinhua-run Shanghai Securities News reported Friday.

After China allowed its currency to appreciate by 2 percent on July 21, 2005, it also imposed a cap on daily fluctuations against the U.S. dollar of 0.3 percent on foreign exchange markets.

Figures show in practice, the daily dollar-RMB exchange rate never fluctuated more than 0.1 percent before March 2006. Since April, however, fluctuations began to exceed 0.1 percent with increasing frequency.

The value of China's currency against the U.S. greenback fluctuated more than 0.1 percent once in April, five days in May and six days in July, the newspaper said.

Dr. Zhao Qingming, a researcher with the China Construction Bank, attributed the current expanding fluctuations to market makers' growing enthusiasm for more frequent trading.

"The 0.3-percent cap could be expanded, but it has to be based on the actual market situation both at home and internationally," said Zhou, the country's central banker early this year.

An expert with Shenyin & Wanguo Securities Co. agrees with Zhou. Lu Wenlei said the 0.3-percent cap is currently sufficient because the actual daily range of trading is far below this level, but will probably need to be expanded in the future when the exchange rate regime becomes more flexible and market endurance of the RMB is enhanced.

Editor: Donald

By: Source: China View website
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