Forex rate control lifted

China lifted controls on the US dollar and yuan exchange rates for banks when dealing with clients, the country's foreign exchange regulator said Wednesday, marking a step forward toward liberalizing the exchange rate.

Banks are allowed to fix the dollar and yuan exchange rate in their over-the-counter deals based on market demand, effective from Wednesday, the State Administration of Foreign Exchange (SAFE) said.

The spread between banks' dollar and yuan buying and selling rates was previously set by the SAFE at no more than 3 percent from the central parity for clients.

But the central bank can still set the central parity rate of the yuan against the US dollar.

In March, the central bank announced it would expand the daily trading band of the yuan's exchange rate against the US dollar to 2.0 percent above or below a daily reference exchange rate from its previous 1 percent limit.