CHINA’S yuan eased against the U.S. dollar yesterday after the central bank doubled the currency’s daily trading band as part of its commitment to let markets play a greater role in the economy.

    Yet the currency moved in a relatively narrow range reflecting market view that the People’s Bank of China will seek to limit currency swings at a time when markets fret over China’s cooling growth and the quality of corporate debt.

    “The central bank, with the help of major State-owned banks, will for certain tighten the grip on the yuan’s value in coming days and weeks to prevent what it sees as excessive volatility,” said a dealer at a European bank in Shanghai.

    In the longer run, however, the central bank is expected to allow the currency to move in a broader range, reflecting its confidence that it can keep speculators at bay and that the economy was mature enough to handle greater uncertainty about the exchange rate.

    “Over time, the widening will pave the way for the central bank to gradually lessen intervention in daily trading and will help China’s reforms make the yuan fully convertible eventually,” said the dealer.

    The People’s Bank of China doubled the yuan’s daily trading range Saturday, so that it can now rise or fall 2 percent around the daily midpoint rate. The yuan opened at 6.15 to the dollar, 0.29 percent to the weaker side of the midpoint rate. It briefly fell to an intraday low of 6.1642, 0.2 percent weaker than Friday’s close.

    Since the start of this year, the yuan has lost 1.8 percent against the dollar, largely as a result of central bank’s efforts, reversing much of last year’s near 3 percent rise as China sought to change the perception the yuan was a safe appreciation bet.

    China’s efforts to clamp down on such trades combined with concerns over the country’s economic health, are expected to keep the yuan on the back foot in coming weeks.

    Earlier this month, a Shenzhen-listed company became the first to default on a corporate bond, and worries of slowing economic growth were highlighted by a dramatic 18 percent fall in exports in February and sluggish manufacturing.

    “The weak economic data imply that it is unlikely to see yuan appreciation and capital inflows after the band widening, indeed the near-term bias could be the opposite,” said Zhu Haibin, an analyst at JP Morgan in Hong Kong. (SD-Agencies)