In a scenario where Chinese Currency could get more freedom in terms of trading size and liberalization, the country took a final step which will lead to the much needed currency reform. In fact, this step from China will convert the national currency Yuan into a global currency, which is ought to push out the American dollars. The trading band will get doubled and the nascent financial markets will feel the heat of this Chinese reform, which is now considered to be the most crucial reform against the dollar.
It should be noted here that the previous limit of rising or falling of the currency was set at the limit of 0.5 percent. But from Monday, it has been allowed to fall or rise by 1% as announced by the People’s Bank of China. The rising or falling will be certainly measured from the mid-point. Beijing gained the confidence for moving ahead in this reform from the fact that Yuan was progressing steadily and the global economic crisis would have further spoiled the whole planning. Everyone knows that stronger currency cannot be achieved with just larger band. It should be noted here that the expectations of the thousands of investors also got the setback due to declining Chinese economy.
China is looking forward to clear its reform roadmap with such announcements and the trading expectations for a stronger Yuan were also very weak. Nonetheless, the central bank of China also seemed to be in mood to get its currency stringer through a viable and timed window. The country has certainly to manage the soft landing in the economy and the moves of the foreign investors also need to be managed and administered perfectly. It should be noted here that this crucial reform came at the time when the International Monetary Fund Meeting is to be held in Washington, just in the following week. There will be no chance of any criticism before this spring meeting about the currency policy and guidelines.
China has already envisaged its dreams of turning Sanghai as the biggest financial city by 2020 and this reform to expand the trading band will help a lot. No doubt, the current reform when implemented from the coming Monday will see less number of financial restrictions and it will further allow the investors to do better sharing and business with the foreign companies. There is no denying the fact with the huge possibilities of managing the risks in a much better way, the Chinese economy is ought to anticipate the growing trends of its currency. You will be surprised to note here that Yuan softened about 0.14% against the highest landmark price of 6.2884 against the American dollar on February 10 this year. It is clear here that Chinese currency is well prepared to withstand the fluctuations and economic volatility.
The impression to the market experts and investors in China is quite robust for the Chinese currency. The country seems to be quite comfortable with the present trend of appreciating currency.