The People's Bank of China (PBOC), or the country's central bank, announced Saturday it will widen the yuan's daily trading limit against U.S. dollar currency to 1 percent beginning Monday.

100 Yuan banknotes are seen in this file photo. [China.org.cn]

In the foreign exchange spot market, Chinese banks can exchange the yuan 1 percent above or below the central parity against the U.S. dollar announced by the China Foreign Exchange Trading System each trading day.

Previously, the daily trading limit was set at 0.5 percent.

China's current foreign exchange market is developing more maturely and trading entities are more capable of pricing independently and managing their risks, the PBOC said in a statement on its website.

Adjusting to the demand of market development, widening of the yuan's trading band aims to promote the price discovery of the exchange of Renminbi, boost the yuan's two-way fluctuation flexibility and improve the market-based managed floating exchange rate regime tied to a basket of foreign currencies, the PBOC said.

The central bank said in the statement that it will maintain the "normal fluctuation" of the yuan's exchange rate, stabilize the rate at "reasonable and balanced levels", and keep the macro economy and financial markets stable.

The yuan strengthened 5 basis points to 6.2879 against the U.S. dollar on Friday.

The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices before the opening of the market each business day.