China's forex market-making banks have voluntarily changed the "counter-cyclical adjustment factor," a currency-fixing tool, to the neutral stance in the pricing mechanism of the yuan's central parity rate in response to weakened yuan depreciation prospects.
Meanwhile, the counter-cyclical adjustment factor still plays a role in the quotation mechanism for central parity rate of the yuan, according to a statement released late Friday by a guild for the inter-bank forex market players.
In May 2017, authorities introduced the counter-cyclical adjustment factor to the existing pricing model of the yuan's central parity rate against the U.S. dollar, aiming to moderate pro-cyclical fluctuations driven by irrational sentiment in the foreign exchange market.
In China's spot market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The Chinese yuan has gained strength against the U.S. dollar since the second half of 2017 thanks to steady domestic economic growth.
Market-making banks might change the stance of the "counter-cyclical factor" in the event of irrational one-way movements on the forex market, according to the statement.
