The Organization for Economic Cooperation and Development (OECD) hailed Thursday China's announcement that it is abandoning the yuan's fixed peg to the US dollar and replacing it with a managed float based on a basket of currencies.

"The OECD applauds this measure as an important step towards giving China's economy the flexibility needed to support rapid and sustainable growth and continued integration with the world economy," OECD Secretary General Donald Johnston said in a statement.

The People's Bank of China announced earlier in the day that it is repegging the yuan against a basket of currencies and revaluing the yuan's rate against the dollar to 8.11 yuan per dollar from 8. 2765 previously.

Sean Dougherty, economist on the OECD's China desk said the move is consistent with recommendations that the OECD will make in its report on the Chinese economy due on Sept. 16.

"It will move in the direction of improving macro economic conditions and will give them a greater rein on monetary policy," he said.

"I think the direction of increasing flexibility is what's needed," he said, adding that the move should help to reduce concerns about the costs of sterilizing capital flows coming into China.

Source: Xinhua