Update: Yam's insight to why the USD gap has been so narrow

I just found that Yam's column Viewpoint is actually on HKMA's site, in both Chinese and English. So I replaced my earlier post of his 10 questions with his original English text.

This is something he said about the observed narrow gap and the futures market, full article here

• "...So far, the day-to-day fluctuations in the renminbi exchange rate against the US dollar have not been very large. The biggest we have seen was 60 pips, or 0.07 per cent, on 11 August 2005, which is lower than the maximum of 0.3 per cent allowable move on a single day. One may therefore question the need for a hedging facility at the moment. But I suspect this number, and the cumulative number in a particular direction over a period of time, are likely to get bigger as the new system is bedded down and as all concerned get accustomed to life with a flexible exchange rate. Let us therefore get on with it."

So PBoC will slowly widen the USD gap to the prescribed 0.3%, once they finished their on-the=jon training. (note the gap is different for each currency)