Broader floating rate for Chinese currency

Broader floating rate for Chinese currency

The consistent critic of the USA and EC as well as international institutions such as IMF and World Bank have now had an effect: The Chinese Government allows the Chinese Central Bank to let the Chinese currency float in a broader way against the USD since Monday of this week

The new margin of the CNY against the USD will be now one percent, up to now it was 0.5 % and it works in both directions. This allows a freer move for the currency transactions and therefore it will be a sort of an image reflecting real trading and market activities. Up to 2015 there will be other reforms taking place in order to liberalise the currency and capital flow system in China. The latest exchange rate was CNY 6.30 for one USD.

The actual decision by the Chinese government seems to prove that the officials consider that a certain desired balance of the CNY against the USD has been reached and necessary interventions of the People’s Bank of China via buying USD would be minimized. Additionally the blow-up of the Chinese currency reserves would diminish. Experts voice the opinion that the CNY will increase thanks to the broader floating by around 1.4 % against the USD during all of 2012.

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