The foreign exchange market is developing in a sound manner and the market participants are increasingly strengthening their pricing and risk management capacities. In order to meet the demand of market development, give market a bigger role in exchange rate pricing, and build a managed floating exchange rate regime based on market supply and demand, the PBOC (People’s Bank of China)has decided to expand the floating band of the exchange rate of RMB against US dollar on the foreign exchange market and is making the following announcement:
Effective from 17 March 2014 onwards, the floating band of RMB against US dollar on the inter-bank spot foreign exchange market is enlarged from 1 percent to 2 percent, i.e., on every trading day on the inter-bank spot market, the trading prices of RMB against U.S. dollar will fluctuate within a band of ±2 percent below and above the central parity as released by the China Foreign Exchange Trade System on that day. On each business day, the spread between the RMB/USD buying and selling prices offered by the designated foreign exchange banks to their clients shall be within 3 percent of the published central parity of US dollar on that day, instead of 2 percent. Other provisions in the PBOC Circular on Relevant Issues Managing the Trading Prices in the Inter-bank Foreign Exchange Market and Quoted Exchange Rates of Exchange-Designated Banks (PBOC Document No.  325) shall remain valid.
The PBOC will continue to prove the market-based RMB exchange rate regime, continue to enable the market to play its roles, enhance the flexibility of RMB exchange rate in both directions, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level.