Wang Tao, an economist with UBS AG in Hong Kong, comments on the widening of the yuan’s trading band by the People’s Bank of China.
“This is largely expected” and a good time to increase the currency’s flexibility, Wang said, citing a reduction in China’s current account balance and balanced market expectations on the yuan with “no large speculative bets one way or the other.”
“Expect increased two way volatility” in yuan trading this year, Wang said. The central bank acted to increase exchange rate flexibility, he said. “Over time that should give monetary policy more independence. For the short term, there is not much impact.”