Investors hail move to relax grip on yuan

[SHANGHAI] The Chinese central bank's decision to relax its grip on the yuan has been welcomed as a sign of financial liberalisation, but it is aggravating concerns among foreign executives and investors about their exposure to China in the near term.

The doubling of the trading band from yesterday points to much greater downside risk in a currency that many investors have treated as a one-way appreciation bet for years, even when the yuan's daily trading range was expanded in the past.

But it adds to a combination of factors that had already made these investors cautious. The central bank had engineered a slide in the yuan's value, adding to jitters in a market already anxious over the country's first default on a domestic bond, and signs of slowing economic growth, highlighted by a dramatic 18 per cent fall in exports last month and sluggish manufacturing.