“The yuan strengthened the most this year as Premier Li Keqiang pledged to come up with a plan this year that would allow investment capital to move more freely in and out of China.
The proposal, part of the government efforts to loosen control over the currency and interest rates, will include a mechanism enabling individuals to invest overseas, the nation’s Cabinet said yesterday. People’s Bank of China Deputy Governor Yi Gang said last month the yuan’s trading band will be widened “in the near future.” The central bank raised the daily reference rate0.05 percent to 6.2083 per dollar, shy of the record 6.2082 on May 2. The currency is allowed to diverge a maximum 1 percent from the fixing.
“China is moving forward with exchange-rate reform and making the yuan more globally used,” said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd. “There have been bets the trading band will be widened, giving more room for appreciation. Yet, it’s unlikely to happen soon as that might fuel speculation and worsen inflation.”
The yuan rose 0.2 percent, this year’s largest one-day gain, to close at 6.1541 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It dropped 0.18 percent yesterday, the most since December, as China intensified scrutiny of cash transfers from abroad. The currency has gained 1.2 percent this year and touched a 19-year high of 6.1521 on May 6.
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In Hong Kong, the yuan gained 0.28 percent, the most in four months, to 6.1585 per dollar, according to data compiled by Bloomberg. It dropped 0.35 percent yesterday, the biggest loss since March 2012, after the currency regulator said it would step up efforts to ensure companies and banks are not bringing in cash for speculative purposes….”
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