China's Ministry of Commerce (MOC) said Tuesday that the country's recent move to lift the daily trading band of its currency, the yuan, will help break the former one-way expectation of the yuan's appreciation.
"Widening the yuan's trading band against the U.S. dollar is an important policy arrangement for improving the formation mechanism of the yuan's exchange rate and a significant step for the market-based reform of the currency's exchange rate," MOC spokesman Shen Danyang told a press conference.
Shen said that the recent move is conducive to breaking the one-way expectation for the yuan's appreciation, cracking down on abnormal foreign exchange movements and creating a more stable environment for foreign trade.
The People's Bank of China, the country's central bank, announced Saturday that it would widen the yuan's daily trading limit against the U.S. dollar from 0.5 percent to 1 percent starting Monday.
In the foreign exchange spot market, Chinese banks can exchange the yuan 1 percent above or below the central parity against the U.S. dollar announced by the China Foreign Exchange Trading System each trading day.