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China adjusts yuan rate, abolishes dollar peg
2005-07-24 20:52:13 Xinhua English

BEIJING, July 21 (Xinhuanet) -- China announced Thursday its currency, the RMB yuan, will be traded at a rate of 8.11 to the US dollar starting 19:00 Thursday, and the yuan to US dollar pegging system is switched to a basket of foreign currencies.

Over the past few years, the Chinese yuan has been pegged to the US dollar at the rate of one dollar for 8.27 yuan, the latest move revalues the rate by 2.1 percent.

The central bank said starting from July 21, it will publish the trading rate between the RMB and major foreign currencies at the closing of daily market trading, and the announced rate will be used as the central parity for the following trading day.

The central bank said the move marks the start of building a more resiliently managed floating RMB exchange rate mechanism which is based on market supply and demand and is adjusted in relation to a basket of major foreign currencies.

The announcement said the trading price between the dollar and the yuan at the inter-bank foreign exchange market will float within a 0.3 percent band around the official central parity, while the trading price between the yuan and non-US dollar currencies will float within a certain range around the official central parity.

The central bank will readjust the floating band at appropriate times according to market development conditions as well as economic and financial situations.

"The RMB exchange rate will be more flexible based on market condition with reference to a basket of currencies," the announcement said, claiming that the central bank is responsible for maintaining the RMB exchange rate basically stable at an adaptive and equilibrium level, so as to promote the basic equilibrium of the balance of payments and safeguard macroeconomicand financial stability.

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