The People’s Bank of China (the Chinese Central Bank) has decided to “proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility,” according to a statement posted its website.

“The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability. It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility,” today’s statement went on to say.

Once you understand the real reason behind China’s decision, you’ll appreciate where the dollar is likely to be heading over the coming weeks and months against the euro, pound and Australian dollar as well.

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