China's central bank is exerting greater control over the yuan by changing the way it sets its official value against the U.S. dollar, its latest effort to prevent big swings in the currency's value as economic worries mount.
The People's Bank of China intends to add a "countercyclical factor" in the model it uses to fix the yuan's daily rate, according to a statement from the China Foreign Exchange Trade System, the currency-trading arm of the People's Bank of China. The purpose of the tweak, which has been in effect on a trial basis in recent days, is to smooth out fluctuations against the dollar, the statement said.
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The shift, which is expected to be fully put in place soon, comes as the central bank is in the midst of escalating efforts to keep the yuan relatively steady against the dollar. Since late last year, it has tightened restrictions on money leaving China's shores, pushed up short-term interest rates and more recently, has been effectively hitching the yuan's value to the dollar.
These measures mark a shift in tactics from last year, when the central bank focused on guiding the yuan lower against the dollar in an orderly fashion. Behind the current emphasis on curbing the yuan's fluctuations is a Chinese leadership that puts priority on economic and political stability ahead of a leadership shuffle later this year. Beijing also wants to avoid increased trade friction with Washington after President Donald Trump accused China of exploiting the yuan's value to help Chinese exporters.
The yuan jumped to its highest value against the dollar in about three months in mainland trading Friday, reaching as high as 6.8493 per dollar.
Write to Lingling Wei at email@example.com
(END) Dow Jones Newswires
May 26, 2017 04:11 ET (08:11 GMT)