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PBOC report signals currency policy change

By Yu Hongyan (chinadaily.com.cn)
Updated: 2010-05-11 14:50
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China may revise its currency policy, as a central bank report said Monday it would manage the yuan "with reference to a basket of currencies", the Economic Information Daily reported Tuesday.

The People's Bank of China said in a monetary policy report that it will improve the floating exchange rate system based on market supply and demand, and maintain the yuan at a reasonable and balanced level.

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"It is a clear signal that China is to unpeg the yuan with the US dollar", Zhao Qingming, senior analyst with China Construction Bank, told the paper. He added that the suitable timing would be around the end of the second quarter or the beginning of the third quarter.

China undertook a currency policy change in 2005, which allowed the yuan to float on the basis of a basket of currencies and let it move more freely. The process was interrupted by the financial crisis, when the yuan was pegged to the US dollar.