The weekend’s financial news is being dominated by the announcement from the People’s Bank of China, who said it will break the dollar peg and give the Reminbi greater flexibility. The PBC said it would allow greater currency flexibility but will not let the currency move more then 0.5 percent per day in keeping its present bands in place–that is, up or down. Directly from the PBC statement:
“With the Balance of Payments[BOP] accountmoving closer to equilibrium,the basis for large-scale appreciation of the RMB exchange rate does not exist … the People’s Bank of Chinahas decided to proceedfurther with reformof the RMB exchange rate regime and to enhance the RMBexchange rate flexibilty.”