CNY 1% Trading Limit May Change Next Week

China will probably widen the yuan’s trading band within the next three days after central bank Deputy Governor Yi Gang signaled policy makers will loosen control over the currency, according to UBS AG.

China may expand the range that the yuan is allowed to trade within during the Group of 20 nations meetings in Washington this week, UBS analysts Manik Narain and Geoffrey Yu wrote in a note.

Yi said during the International Monetary Fund meeting April 17 that the yuan’s trading band will be widened “in the near future.” The currency is currently allowed to trade 1 percent on either side of an official fixing. The People’s Bank of China doubled the band from 0.5 percent a year ago, the first widening since 2007.

“Signs are pretty clear that the PBOC is preparing a band widening very soon,” wrote the analysts. “As for timing, there is a risk that it happens over the course of the next 72 hours, to coincide with the G-20 meetings being held in Washington D.C. and the first anniversary of the previous widening to plus or minus 1 percent.”

Bloomberg

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