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19 Apr 2013
Forex Flash: China will further relax the FX trading band - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that the Chinese are set to further relax the FX Trading band.
They begin by recapping that when the strict yuan peg ended in July 2005, the +/- 0.3% trading band was put in place for USD and +/- 1.5% for non-dollar foreign currencies. Then in September 2005, the non-dollar trading band was widened from +/- 1.5% to +/- 3.0%, but USD band maintained. They see that the USD trading band was then widened from +/- 0.3% to +/- 0.5% back in May 2007. Next in April 2012, the USD band was widened from +/- 0.5% to +/- 1.0%, which is where it stands now. They write, “Looking at past patterns, a move to widen the USD band from +/- 1.0% to +/- 1.5% would seem the more natural course.”
They begin by recapping that when the strict yuan peg ended in July 2005, the +/- 0.3% trading band was put in place for USD and +/- 1.5% for non-dollar foreign currencies. Then in September 2005, the non-dollar trading band was widened from +/- 1.5% to +/- 3.0%, but USD band maintained. They see that the USD trading band was then widened from +/- 0.3% to +/- 0.5% back in May 2007. Next in April 2012, the USD band was widened from +/- 0.5% to +/- 1.0%, which is where it stands now. They write, “Looking at past patterns, a move to widen the USD band from +/- 1.0% to +/- 1.5% would seem the more natural course.”