China's yuan closed up 0.3 percent against the dollar on Tuesday, its strongest one-day gain since March, after the country's foreign exchange regulator published new rules further liberalising the currency market. The yuan closed at 6.2020 per dollar, after hitting a seven-month low of 6.2362 in early trade. The see-saw moves also marked one of the currency's most volatile days since its landmark revaluation in 2005.
China will relax restrictions on banks' yuan trading from January 1, replacing daily caps on banks' foreign exchange positions with weekly limits, the State Administration of Foreign Exchange said in new rules published on Tuesday. Starting from Thursday, SAFE will only check banks' position compliance status each week, leaving them leeway to short dollars within that period, traders said. "The new regulations are in line with Beijing's long-term policy to increase market volatility so as to create conditions for a two-way trading for the Chinese currency," said a senior dealer at a major European bank in Shanghai.
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