China to widen yuan trading band

In response to rapid economic growth, China’s central bank said it would widen the yuan’s trading price range against the U.S. dollar.

In response to rapid economic growth, China’s central bank said it would widen the yuan’s trading price range against the U.S. dollar.
The yuan’s trading band will expand to 0.5% above and below its central parity rate, from 0.3%, effective May 21.
Benchmark deposit and lending rates will also go up.
As of tomorrow, the one-year yuan lending rate will be 6.57%, up from 6.39%.
Meanwhile, the deposit rate will be raised to 3.06% from 2.79%.
Still, China does not expect to see major appreciations or fluctuations in the yuan’s exchange rate. Rather, the central bank said it would coordinate its macroeconomic policies in order to “create a favorable policy environment for exchange rate stability, and keep the exchange rate basically stable at an adaptive and equilibrium level.
The changes coincide with Chinese vice premier Wu Yi and U.S. treasury secretary Henry Paulson’s May 22-24 meeting in Washington, sparking rumors that China is trying defuse criticism that it keeps the yuan weak in order to make the nation’s exports cheap, published reports said.