BEIJING (AFP) - Chinas central bank said Saturday it would further promote reform of its exchange rate mechanism, which analysts said indicated Beijing was ready to scrap the dollar peg and allow the yuan to rise. However, the Peoples Bank of China said there were no grounds for large swings in the currency, suggesting policymakers would maintain their tight grip on the value of the yuan. The statement was released amid growing pressure on Beijing to strengthen its currency and comes ahead of next weeks G20 nations meeting in Toronto, when the controversial exchange rate policy is expected to be on the agenda. Chinas central bank has decided to further promote the reform of the RMB (yuan) exchange rate mechanism, and strengthen the flexibility of the RMB exchange rate, the central bank said on its website. However, the bank said there was no basis for large movements or change in the exchange rate and reiterated that it would continue to manage the floating exchange rate within the band already announced. Central bank adviser Li Daokui said the statement marked an end to the fixed exchange rate but added he had no idea when the trading band would be widened, Dow Jones Newswires reported. The move to increase the flexibility of the exchange rate was Chinas own decision and had no direct connection with the G20 summit, said Li, a member of the central banks monetary policy committee. Analysts said the statement suggested the government was moving away from the financial crisis exchange rate policy of effectively freezing the yuan against the dollar, which critics say gives Chinas exports an unfair trade advantage. I think they are saying this is the basic end of the de facto peg and they will be moving back to the 2005 system and this will mean gradual appreciation over time, said a Beijing-based analyst who declined to be named. Morgan Stanley economist Wang Qing said the move to exit the dollar-peg was a switch to the pre-crisis regime. Export-driven China has effectively pegged the yuan to around 6.8 to the dollar since July 2008 to support manufacturers battered by the financial crisis and preserve jobs in a sector that employs tens of millions of people. The currency has been allowed to move within a 0.5 percent range on either side of the peg. In 2005, China made its currency slightly more flexible and allowed the yuan to appreciate about 20 percent against the dollar until July 2008. Todays decision should pave the way for gradual appreciation of the yuan against the dollar over the rest of the year, said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong. The bank said that given the gradual recovery in the global economy and greater stability in China, it was desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility. It added that the exchange rate would maintain a reference to a basket of currencies. The statement may be an attempt by Beijing to dampen expectations of a significant move in the yuan before the June 26-27 summit of world powers including the United States a vocal critic of the exchange rate policy. Chinese President Hu Jintao will pay a state visit to Canada next week ahead of the summit and the government said last week he was not open to debate about currency rates. Facing election-year pressure, US lawmakers from both sides of the political aisle have vowed to launch legislative action within weeks to punish China over its currency policy. In a letter to Commerce Secretary Gary Locke this month, they sought a ruling on whether Beijings currency policy provided an unfair subsidy for Chinese paper products that should be remedied through trade measures. Beijing has defended the exchange rate policy as necessary to help exporters even as the worlds third largest economy grew a blistering 11.9 percent in the first quarter and demand for Chinese-made products rebounded. Speculation has been growing in recent months that Beijing may soon let the yuan appreciate, with a number of central bank officials hinting that a change in the exchange rate policy could be in the offing. In March, Peoples Bank of China governor Zhou Xiaochuan said the exchange rate policy was temporary and would be scrapped sooner or later along with other crisis-measures.