Change in yuan rate calculation to ease 'herd effects'

China is considering introducing a "countercyclical factor" to adjust the way it calculates the yuan's daily reference rate against the dollar, according to a statement by the country's foreign exchange trading system on Friday. Analysts said the move will help prevent excessive fluctuation of the currency.

The change in the method of setting the yuan's daily central parity rate against the dollar will better reflect the market supply and demand, lessen possible "herd effects" in the market and help guide the market to focus more on macroeconomic fundamentals, the China Foreign Exchange Trade System said.

China's foreign exchange market is prone to the "habitual influences of irrational expectations" and one-way market expectations can sometimes be exaggerated, failing to reflect the real relationship between market supply and demand, the statement said.