China allows yuan to rise against Western currencies

China's central bank, the People's Bank of China (PBOC), has announced that it will allow the yuan to rise against the dollar and other Western currencies, according to the BBC.

At the moment, the yuan has been held at about 6.83 to the dollar since July 2008.

No timeline has been set for this.

The yuan's 0.5pc daily trading band will not change, according to Garry White in the Daily Telegraph, but daily reference rates will be used by the PBOC to guide the exchange rate higher.

United States President Barack Obama commented: "China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy."

Garry White comments that this announcement may deflect pressure on China to change its policy at the G20 leaders' meeting.

This development will improve relations between China and the Western world, and will improve trade with China.

International Monetary Fund head Dominique Strauss-Kahn also commentated that increased flexibility will:"help increase Chinese household income and provide incentives necessary to reorient investment toward industries that serve the Chinese consumer" according to Reuters.