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China abolishes yuan-dollar peg, adopts floating rate
In a long-awaited but unexpected move, China yesterday announced that its currency will no longer be pegged to the US dollar.
From now on the renminbi, or yuan's, exchange rate will be adjusted according to a basket of currencies, the People's Bank of China (PBOC) said, adding that it marked the introduction of "a more flexible mechanism for the exchange rate's formation." The central bank did not specify what currencies would be in the basket. The central bank strengthened the exchange rate of the renminbi to 8.11 to the dollar, up from 8.28, where it had been fixed for years, it said in a surprise announcement on the State television evening news. The change amounts to a 2 per cent appreciation of the renminbi. The reform is "in the interests of the country's long-term, fundamental interests," the central bank said in a separate statement. Pursuing a more flexible, market-based foreign exchange system has been on
the agenda for the country's economic reform.
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