The People's Bank of China is considering a higher trading range for the yuan to allow it to move 3% against the dollar from the daily mid-point rate set by the central bank, up from the current 2% daily limit, Reuters reported, citing "four sources familiar with internal policy discussions."
A wider yuan trading band, which is likely to take effect after a five-yearly Communist party meeting expected in the fourth quarter, could help in trade talks with the U.S., but strict controls on capital outflows and the daily starting point of yuan trading would reduce its impact, the sources said. Meanwhile, "another source familiar with the discussions on the yuan" said a decision before the meeting is also possible.
The band was widened in the last two run-ups to party meetings, in 2007 and 2012.
"The impact [of the move] won't be big – it may just be a gesture to express the commitment to long-term market reform," according to one source who advises the government on policy.
While there appears to be no immediate market pressure to widen the range, as the currency has never hit the 2% limit introduced in March 2014, the country has been facing increasing calls for yuan liberalization.
The yuan has risen just over 3% against the dollar in 2017, after a 6.5% decline in 2016, the biggest annual drop since 1994, Reuters reported.