According to a report from the National Financial Supervisory Commission, the economy will receive high pressure on the exchange rate in 2016. The report estimated some unfavorable factors for the balance of payments, including a high trade deficit at 4 billion USD, and the depreciation of other currencies against the US dollar.
Under the new mechanism, the reference rate—or the inter-bank exchange rate—would be managed more flexibly and could be changed regularly, even daily. Specifically, the exchange rates of other banks will fluctuate around the reference rate with a margin of 3%.
There are two main components to determine the exchange rate of the day: an interbank weighted average exchange rate and the volatility of the US dollar compared with other currencies in the previous day.
