China's central bank widened the yuan's daily trading band from the current 1 percent to 2 percent on March 17.

Chinese banks now can exchange the yuan in the foreign exchange spot market at 2 percent above or below the central parity against the U.S. dollar announced by the China Foreign Exchange Trading System each trading day, according to the statement from the People's Bank of China (PBC).

The move will enhance the floating flexibility of the yuan exchange rate and improve the efficiency of capital allocation, facilitate economic restructuring and beef up the decisive role of the market in allocating resources, the PBC said.

China has taken a gradual and steady pace in raising its currency's daily trading limit, from 0.3 percent in 1994 to 0.5 percent in 2007 and 1 percent in 2012 to the most recent 2 percent.

The Chinese yuan experienced continued weakening against the U.S. dollar in February, causing widespread concerns over its domestic and international impacts on trade and the financial sector. The widening of the trading band will not lead to steep depreciation of the Chinese yuan, the central bank said, citing the improving balance of payments and rich foreign exchange deposit.

The PBC will further push the liberalization of the yuan's exchange rate and diversify foreign exchange products to build a market-guided and properly regulated floating exchange rate system.