China's central bank took a step toward further flexibility in its foreign exchange system Friday, announcing it was widening the daily range for trading between the yuan and three other currencies, but not the U.S. dollar.
The yuan's exchange rate against the euro, yen and Hong Kong dollar will be allowed to fluctuate up to 3 percent above or below their opening levels, up from the previous band of 1.5 percent in either direction, according to a statement posted on the central bank's Web site.
But the central bank held firm its grip on the yuan's exchange rate to the U.S. dollar, keeping the daily trading band steady at 0.3 percent in either direction, as determined when authorities revalued the yuan on July 21, according to the AP.
At that time, the central bank scraped the yuan's decade-long peg to the U.S. dollar and instead allowing it to trade against a basket of currencies. It also allowed the yuan to gain 2.1 percent against the dollar, to 8.11 from a previous rate of 8.27 yuan to the dollar.
So far, trading in the currency pairs affected by Friday's change has not been volatile, analysts said. They viewed the change as a sign of more reforms are planned.
The yuan fell against the dollar Friday after hitting its highest level since the July 21 revaluation, in one of its most volatile days of trading. The yuan closed at 8.0910 after surging to 8.0860 at mid-morning. It ended at 8.0881 on Thursday.