TEXT-Chinese central bank statement on yuan's non-dollar bands
Sunday September 25, 5:48 PM
TEXT-Chinese central bank statement on yuan's non-dollar bands
BEIJING, Sept 25 (Reuters) - Following is the full text of the central bank's statement issued alongside new rules that widened the yuan's trading band against non-dollar currencies.
The statement was published on the central bank's Web site (www.pbc.gov.cn) on Friday.
For the rules themselves, double click on [nPEK30861].
In line with the implementation of the exchange rate policies since the reform of the RMB exchange rate regime, and in order to further develop the foreign exchange market, improve the RMB exchange rate formation mechanism and foster enhancement of the foreign-exchange designated banks' capability in pricing and risk management, the People's Bank of China issues the Circular on Further Improving the Management of the Trading Prices in the Inter-bank Foreign Exchange Market and the Quoted Exchange Rates of the Foreign Exchange-Designated Banks (herein after referred to as the Circular).
The Circular is a supplement to the Notice of the People's Bank of China on the Management of the Trading Prices in the Inter-bank Foreign Exchange Market and the Quoted Exchange Rates of the Foreign Exchange-Designated Banks, within the framework of the Public Announcement on the Reform of the RMB Exchange Rate Regime published by the People's Bank of China on July 21, 2005. According to the Circular, band of RMB exchange rate against non-US dollar currencies in the spot foreign exchange market was widened from the previous level of no more than 1.5 percent to no more than 3 percent around the central parity. Management of US dollar exchange rates quoted by foreign exchange-designated banks to their customers has also been modified, with the spread between the selling rate and buying rate widened and the previous symmetric management of quoted exchange rates based on floatation of no more than 0.2 percent around the central price shifted to an asymmetric management mode limiting the spread between the selling and buying prices to no more than 1 percent of the central price, so long as the central price is within this 1 percent interval. Management of foreign exchange cash trading prices was also adjusted, with the limit on the spread between the selling price and buying price expanded from no more than 1 percent to 4 percent of the central price. Banks are allowed to make adjustment of the quoted US dollar price to customers at their own discretion within the specified limit on spread. That means the banks could quote different US dollar prices rather than only one price to their customers within a business day. The Circular also abolished limits on the spread between the selling and buying prices of non-US dollar currencies quoted by banks to their customers. By that, banks will have the discretion to decide the prices of non-US dollar currencies against the RMB and negotiate with customers on the quoted prices of these currencies.
On July 21, 2005, the People's Bank of China modified its management of the trading prices in the inter-bank foreign exchange market and the quoted exchange rates of the foreign exchange designated banks. Such an action has ensured the steady progress of the reform of the RMB exchange rate regime and strengthened autonomy of the foreign exchange designated banks in setting foreign exchange prices. Measures mapped out in this Circular will serve to further increase the banks' capability in setting prices and effectively controlling price risks, foster fair and orderly competition among the banks and improve financial services to the customers, promote effective adjustment of the RMB exchange rate based on market supply and demand with reference to a basket of currencies, and strengthen the fundamental role of market in price finding and risk aversion. Appropriate enlargement of the spread between the selling and buying prices of the US dollar quoted by the banks to their customers may also increase the transaction cost of the speculators, thus help maintain the basic stability of the RMB exchange rate.
The adjustment of the exchange rate management policy does not change the daily band of the RMB against the US dollar in the inter-bank market, which is still limited to no more than 0.3 percent of the central parity published by the People's Bank of China. The People's Bank of China and the State Administration of Foreign Exchange will continue to improve the RMB exchange rate regime in a proactive, controllable and gradual way, so as to enhance the exchange rate system and keep the RMB exchange rate basically stable at an adaptive and equilibrium level."
TEXT-Chinese central bank statement on yuan's non-dollar bands
BEIJING, Sept 25 (Reuters) - Following is the full text of the central bank's statement issued alongside new rules that widened the yuan's trading band against non-dollar currencies.
The statement was published on the central bank's Web site (www.pbc.gov.cn) on Friday.
For the rules themselves, double click on [nPEK30861].
In line with the implementation of the exchange rate policies since the reform of the RMB exchange rate regime, and in order to further develop the foreign exchange market, improve the RMB exchange rate formation mechanism and foster enhancement of the foreign-exchange designated banks' capability in pricing and risk management, the People's Bank of China issues the Circular on Further Improving the Management of the Trading Prices in the Inter-bank Foreign Exchange Market and the Quoted Exchange Rates of the Foreign Exchange-Designated Banks (herein after referred to as the Circular).
The Circular is a supplement to the Notice of the People's Bank of China on the Management of the Trading Prices in the Inter-bank Foreign Exchange Market and the Quoted Exchange Rates of the Foreign Exchange-Designated Banks, within the framework of the Public Announcement on the Reform of the RMB Exchange Rate Regime published by the People's Bank of China on July 21, 2005. According to the Circular, band of RMB exchange rate against non-US dollar currencies in the spot foreign exchange market was widened from the previous level of no more than 1.5 percent to no more than 3 percent around the central parity. Management of US dollar exchange rates quoted by foreign exchange-designated banks to their customers has also been modified, with the spread between the selling rate and buying rate widened and the previous symmetric management of quoted exchange rates based on floatation of no more than 0.2 percent around the central price shifted to an asymmetric management mode limiting the spread between the selling and buying prices to no more than 1 percent of the central price, so long as the central price is within this 1 percent interval. Management of foreign exchange cash trading prices was also adjusted, with the limit on the spread between the selling price and buying price expanded from no more than 1 percent to 4 percent of the central price. Banks are allowed to make adjustment of the quoted US dollar price to customers at their own discretion within the specified limit on spread. That means the banks could quote different US dollar prices rather than only one price to their customers within a business day. The Circular also abolished limits on the spread between the selling and buying prices of non-US dollar currencies quoted by banks to their customers. By that, banks will have the discretion to decide the prices of non-US dollar currencies against the RMB and negotiate with customers on the quoted prices of these currencies.
On July 21, 2005, the People's Bank of China modified its management of the trading prices in the inter-bank foreign exchange market and the quoted exchange rates of the foreign exchange designated banks. Such an action has ensured the steady progress of the reform of the RMB exchange rate regime and strengthened autonomy of the foreign exchange designated banks in setting foreign exchange prices. Measures mapped out in this Circular will serve to further increase the banks' capability in setting prices and effectively controlling price risks, foster fair and orderly competition among the banks and improve financial services to the customers, promote effective adjustment of the RMB exchange rate based on market supply and demand with reference to a basket of currencies, and strengthen the fundamental role of market in price finding and risk aversion. Appropriate enlargement of the spread between the selling and buying prices of the US dollar quoted by the banks to their customers may also increase the transaction cost of the speculators, thus help maintain the basic stability of the RMB exchange rate.
The adjustment of the exchange rate management policy does not change the daily band of the RMB against the US dollar in the inter-bank market, which is still limited to no more than 0.3 percent of the central parity published by the People's Bank of China. The People's Bank of China and the State Administration of Foreign Exchange will continue to improve the RMB exchange rate regime in a proactive, controllable and gradual way, so as to enhance the exchange rate system and keep the RMB exchange rate basically stable at an adaptive and equilibrium level."
posted by Eastlaw at Monday, September 26, 2005
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