The People's Bank of China (PBOC), the country's central bank, on Saturday, announced it would widen the yuan's daily trading limit against the U.S. dollar to one per cent from Monday.

In the foreign exchange spot market, Chinese banks can exchange the yuan one per cent above or below the central parity against the U.S. dollar announced by the China Foreign Exchange Trading System each trading day.

Previously, the daily trading limit was set at 0.5 per cent. The announcement came a month after PBOC Governor Zhou Xiaochuan told Xinhua on the sidelines of the annual parliamentary session that the country is considering ‘appropriately' widening the yuan's trading band to better reflect an exchange rate regime decided by market supply and demand.

Adjusting to the demand of market development, widening the yuan's trading band aims to promote exchange of the Renminbi, boost the yuan's two-way fluctuation flexibility and improve the market-based managed floating exchange rate regime tied to a basket of foreign currencies, according to the PBOC.

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