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.
NO VIRUS BLUES: A SEMI Taiwan official said that the virus does not slow down the global semiconductor industry’s investment in manufacturing equipment The production value of the nation’s semiconductor industry is expected to grow 16.7 percent this year from last year, outpacing the global industry’s 3.3 percent growth, industry association SEMI said yesterday. That would help Taiwan safeguard its second spot in the global semiconductor market with a production value of more than NT$3 trillion (US$102.73 billion), SEMI Taiwan president Terry Tsao (曹世綸) told a media briefing in Taipei for the Semicon Taiwan trade show beginning today. The global semiconductor industry’s production value is expected to increase to US$426 billion this year, SEMI said. In terms of semiconductor equipment investment, equipment billings from Taiwanese firms
Intel Corp has received licenses from US authorities to continue supplying certain products to Huawei Technologies Co (華為), a company spokesman said yesterday. Washington has been pushing governments around to world to squeeze out Huawei, saying that the telecom giant would hand data to Beijing for espionage. From Monday last week, new curbs have barred US companies from supplying or servicing Huawei. This week, the state-backed China Securities Journal reported that Intel had received permission to supply Huawei. China’s Semiconductor Manufacturing International Corp (SMIC, 中芯國際), which uses US-origin equipment to make chips for Huawei and other companies, last week confirmed that it had sought
Taipei Times: When do you think the hospitality industry can return to how it was before the COVID-19 pandemic? How does Formosa International Hotels Group (FIH, 晶華酒店集團) fare this quarter and beyond? FIH chairman Steve Pan (潘思亮): The virus outbreak will have a serious impact on business travel, driven mainly by meetings, incentive travel, conferences and exhibitions over the past three decades. For the past six months, many businesspeople have grown used to exchanging information on the Internet, where more people can participate. The trend might sustain for three to five years until people are vaccinated and it is safe to
DIGITAL COMMERCE: In 2016, only 2 percent of orders were delivered in Taiwan, but that has risen to 10 percent, Foodpanda Taiwan Co operations director Nick Yu said Online food delivery platforms have seen explosive growth in Taiwan this year, helped by business opportunities related to the COVID-19 pandemic, company executives said at a digital commerce conference in Taipei yesterday. When the threat of COVID-19 kept people from going out to eat, more people experimented with ordering food deliveries online, Foodpanda Taiwan Co Ltd (富胖達) operations director Nick Yu (余岳勳) said. Foodpanda started operations in Taiwan in 2012. “We experienced 5,000 percent growth in the past 24 months,” Yu said. “That’s more than the previous six years combined.” In 2016, only 2 percent of food orders were delivered in Taiwan, but that