China has taken another big step toward liberalizing the yuan's exchange rate by allowing banks to hold short positions in foreign currencies.
The PBOC announced on Saturday the yuan will be allowed to fluctuate by 1 percent from a daily midpoint from Apr 16, double the previous 0.5 percent.
The renminbi's exchange rate is nearing "equilibrium", a central bank researcher said on Wednesday, suggesting that the currency would be more likely to experience two-way fluctuation instead of the unilateral appreciation of previous years.
How the yuan appreciation would affect foreign companies that are listed on the world stock markets has not been discussed much.
Short-term capital flows make exchange rate more volatile, posing new challenges for decision-makers in China and the United States.
During his recent visit to China and Japan, US Treasury Secretary Timothy Geithner discussed sanctions against Iran and the global economy.
Although the yuan is currently facing appreciation pressure, it's possible the currency will face depreciation pressure within two years.
China's Ministry of Commerce (MOC) reiterated on Wednesday that accusations on the exchange rate issue of Chinese currency is groundless and unreasonable.
HONOLULU / BEIJING - The exchange rate did not cause structural problems in the US economy, such as the trade deficit and unemployment, President Hu Jintao said during a meeting on Saturday with US President Barack Obama.
Although troubled by an ailing economy and mass protests at home, US senators have once again shown their never-ending enthusiasm for attacking China's exchange rate by passing the "Currency Exchange Rate Oversight Reform Act of 2011" project plan in an attempt to pressure China into appreciating its currency.
Since the outbreak of the US debt crisis, Beijing has been urging Washington to shoulder its responsibilities.
The ongoing debt crisis in the US and Europe may force China to move faster on renminbi appreciation to mitigate the fallout on the domestic economy, experts say.