The People’s Bank of China said that from Monday it will double the trading band, so that the yuan can fluctuate by 1pc every day from a mid-point, compared with its previous limit of 0.5pc.
The move demonstrates Beijing’s belief that the yuan is now stable enough to handle major structural reforms, despite slowing growth of the Chinese economy.
Analysts said the slowdown may have actually spurred Beijing to make the change, because the Chinese government knew it could introduce the larger band without causing a spike in the yuan’s value.
"The central bank chose a good time window to enlarge the trading band. The market's expectation for a stronger yuan is weakening," said Dong Xian'an, chief economist at Peking First Advisory in Beijing.
Nonetheless, The People's Bank of China took the unusual step of issuing its announcement in English rather than Mandarin.