China Widens Yuan Band to Show Reform Progress, OCBC’s Xie Says
Tommy Xie, a Shanghai-based economist at Overseas-Chinese Banking Corp., comments on the widening of the yuan’s trading bank by the People’s Bank of China.
“Technically speaking, I don’t see urgency” for the move,” Xie said, calling it “more symbolic than meaningful” while the yuan-fixing mechanism remains non-transparent.
“China was definitely not forced to widen its trading band” and the move is “definitely not equivalent to renminbi depreciation in the short term,” Xie said. It’s part of a package to show the world progress in reform, he said.
“Today’s announcement is likely to lead to a spike in yuan’s short term volatility. In the medium term, the correlation between spot yuan and global currency market may increase” given widening room for daily movement, Xie said. “This may have feed-through effect on Asian currencies.”
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