The Chinese currency, the yuan, has been trading for the first time since the country’s central bank relaxed its foreign exchange rules.
The People’s Bank of China is now allowing the currency to rise or fall by one per cent from a value it fixes – that is double the previous limit.
The United States and the International Monetary Fund have welcomed the change, which could herald wider financial reform in China.
Joy Yang from Mirae Asset China said: “If you look at most of the other emerging markets who have floating management of their exchange rate, then their trading band is much wider than one percent and most of them are having three percent to five percent. So I think one percent is just getting started; and looking forward, we expect more steps to further widen the trade band.”
Critics in the US have claimed Beijing has had an unfair trading advantage by deliberately keeping the yuan low, so Chinese products are easier to sell abroad.
China would ultimately like to see the yuan rival the dollar as a global reserve currency, and Shanghai as a major financial centre.