China May Widen Yuan Trading Band Pretty Soon

China is expected to widen the trading band of Yuan within the next 3 days, as signaled by the Deputy Governor of the Chinese Central Bank, Yi Gang. Gang stated that the policy makers will loosen control over the currency and according to UBS; this is clear indication that the trading band will be widened. According to the notes released by the analysts of UBS, Manik Narain and Geoffrey Yu, the range that the Yuan is allowed to trade may be expanded during the Group of 20 meetings to be held during the week in Washington.

Incidentally, during a meeting of the International Monetary Fund, Yi stated that the trading brand of Yuan will be expanded in the near future. Currently, Yuan is allowed to trade 1% on either side of an official fixing. The band was already doubled from the earlier value of 0.5%, the first widening happening since 2007.

In the note released by UBS, the analysts stated that the signals are pretty strong that the People’s Bank of China is heading towards a band widening pretty soon. The note stated that when it comes to timing, there is a risk that the same may happen within the next 72 hours to coincide with the Group of 20 meetings. Yuan is currently trading close to the 1% upper limit of the official rate and the case has been same from last October. The growing economy of China has been able to attract foreign capital as well. Yuan is currently priced at 6.1723 per USD after it experienced a fall of 0.2% to 6.1813 on yesterday. The data was released by the China Foreign Exchange Trade System.

When it comes to the 12-month non-deliverable forwards on the Yuan, the same jumped up by 0.1% to 6.248 per USD, thereby suggesting that the traders expect Yuan to be changed a little within the next 12 months. Many predict that Yuan will end the current year at 6.13 per USD.

During the International Monetary Fund conference, Yi stated that the exchange rate will be more market oriented from now on. Many analysts feel that the floating band may be taken even to a higher level in near future. Some of the analysts also think that China may come under pressure from the Group of 20 members to quicken the appreciation of Yuan.