Friday, May 18, 2007

China yuan band widening a modest gesture to US - BNP Paribas (AFX News Limited)

BEIJING (XFN-ASIA) - China's widening of the yuan's daily trading band is a modest gesture to the US ahead of a high level meeting with American officials in Washington, said Chen Xingdong, an economist with BNP Paribas in Beijing.

'The band widening band is a gesture because (Chinese Vice-Premier Wu Yi) is going to the US,' said Chen. He added that the measure is designed to show some movement but no major appreciation in the currency can be expected. 'The message is clear; China wants to show the US that it has done something and it wants to tell the Americans that it's only going to do a little, not a lot.' China widened the daily trading band around the yuan's central parity rate to 0.5 pct from 0.3 pct. The central bank sets the parity rate each day. The yuan is said to be under a managed float with the rate linked to a basket of currencies. Senior Chinese and US officials meet in Washington for the 'strategic economic dialogue' -- a forum for discussing key economic and financial issues. The US has long been pressuring China to make the yuan's exchange rate more flexible.

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