China doubled the limit for the yuan’s daily moves against the US dollar, easing controls on the exchange rate as appreciation bets waned amid slower economic growth.
The yuan will, from today, be able to trade as much as 2 percent on either side of a daily central bank reference rate, from 1 percent previously, the People’s Bank of China (PBOC) said in a statement on its Web site on Saturday.
The band was last widened in April 2012 from 0.5 percent, and before that from 0.3 percent in May 2007.
The move underscores pledges from China’s leaders to make the exchange rate more market-based and promote freer movement of capital in and out of the country for investment purposes.
The central bank said on Saturday it will continue to increase the yuan’s two-way flexibility after last month highlighting an “orderly” broadening of the currency’s trading band among its policy goals this year.
The band widening “strengthens the bank’s signal that the one-way bet on the yuan’s gain is over and we should expect much more yuan-dollar volatility going forward,” Lu Ting (陸挺), head of Greater China economics at Bank of America Corp in Hong Kong, said in an e-mail.
“Further band widening is of little meaning. A much more important and meaningful reform is to change the rule on setting the daily fixing,” Lu added.
The central bank needs to shift to a new market-based system, Lu said. As an intermediate step in improving the fixing, it could peg the yuan to a basket of currencies weighted by the importance of its trading partners, Lu said.
While the central bank will “basically exit” normal foreign-exchange intervention to allow markets a greater role, it will “conduct the necessary adjustment and management” in cases of abnormally large fluctuations, the bank said in a separate statement.
The currency has slid 1.8 percent from a 20-year high of 6.0406 per US dollar reached on Jan. 14, after rising 2.9 percent last year.
The yuan fell as much as 0.86 percent on Feb. 28, the biggest intraday loss in China Foreign Exchange Trade System prices going back to 2007.
The drop was also the largest since China unified official and market exchange rates at the start of 1994. The yuan closed at 6.1502 on Friday.
Recent weakness was driven by the central bank in order to curb one-way appreciation bets before broadening the trading limit, HSBC Holdings Plc strategists led by Paul Mackel wrote in a note on Saturday.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, touched an 18-month high of 2.49 percent on Friday.
Non-deliverable forwards due in 12 months completed the biggest weekly drop since November 2011.
Saturday’s announcement follows data signaling an economic slowdown that may make Chinese Premier Li Keqiang’s (李克強) expansion target this year of about 7.5 percent harder to reach.
Industrial output had the weakest January-to-February growth since 2009 and fixed-asset investment increased at the slowest pace for the two-month period in 13 years, government reports released on Thursday showed.
GDP rose 7.7 percent last year, the same pace as in 2012, which was the weakest increase since 1999.
Yuan appreciation and capital inflows are unlikely amid the weak economic data, JPMorgan economists led by Zhu Haibin (朱海濱) wrote in a research note.
“Yuan depreciation could support exports, and capital outflow will drain domestic liquidity and open the window for reserve-requirement ratio cuts by the PBOC,” they said.
Zhu cut his growth estimate for this year to 7.2 percent from 7.4 percent two weeks ago.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”