UPDATE 1-China says capital flows, major FX to decide yuan value
BEIJING, Nov 11 (Reuters) - China will refer to changes in capital flows and fluctuations in the values of major currencies when guiding the value of the yuan CNY=CFXS, the central bank said on Wednesday, in a departure from past language.
The reference to a new set of benchmarks for determining the value of the yuan holds out the possibility of a departure from past practice, which has seen the currency in a holding pattern since mid-2008, at around 6.83 per dollar.
"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism," the central bank said in a 46-page monetary policy report.
Until now, ever since the landmark revaluation and launching of forex reforms in July 2005, the People's Bank of China has stuck to the language of keeping the yuan "basically stable at a reasonable and balanced level" when talking about future forex reforms in such quarterly reports.
The comments come ahead of a visit to China next week by U.S. President Barack Obama, and come amid growing pressure from other countries for Beijing to let its currency be more flexible in the face of dollar weakness.
The central bank added in its report that it would stick to its loose monetary policy stance and keep sufficient liquidity in the banking system. It said it expected continued impact from falling external demand.
Data issued on Wednesday showed factory output growth surged to a 19-month high in October, suggesting the world's third-largest economy has firmly put the worst of the global financial crisis behind it. [ID:nPEK212006] (Reporting by Zhou Xin, Aileen Wang and Jason Subler; Editing by Ken Wills)
