Further changes to yuan ‘at proper time’

Beijing, August 4:

China’s central bank said that it will make further adjustments to the yuan at an appropriate time, signalling that more changes to the currency would be forthcoming after a 2.1 per cent revaluation two weeks ago. However, any further adjustments to the yuan exchange rate would depend on the financial environment with reference to the basket of currencies that the yuan is placed in, the central bank said in its second quarter report. “The central bank will adjust the exchange rate floating band at the proper time according to market developments and the economic and financial situation,” the statement said. The People’s Bank of China pledged to maintain “a normal float” of the exchange rate and reiterated that it would also maintain the currency’s level with a reasonable and balanced level. It reiterated that over time, it would explain to the markets the workings of the currency basket, and reintroduce derivative tools such as forwards and swaps to the interbank market to better provide risk management tools. China freed the yuan from an 11-year-old peg to the US dollar in favor of a trade-weighted basket of currencies, allowing the yuan to appreciate 2.1 per cent, but keeping foreign currency details on the basket murky. The Chinese yuan closed at 8.1027 to the dollar on Thursday, its highest level since the yuan had been revaluated.