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August 24, 2009

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Home » Business » Economy

Dominant dollar to curb rise

ALTHOUGH the United States economy is still weak and uncertainties hover over its recovery, the yuan is seen to rise against the US dollar by a small range in the future because the greenback is still a dominant international reserve currency, analysts said.

The Chinese currency edged up against the US dollar and closed at 6.8313 last Friday, according to the China Foreign Exchange Trade System. The yuan closed at 6.8328 at the end of the previous week.

"The US dollar is still a leading international currency, and China will maintain the exchange rate within a very close range," said Liu Hantao, a foreign exchange trader at China Construction Bank.

Tan Yaling, an analyst at the Bank of China, wrote in a research report that the US dollar "will continue to be rather weak and the US economy needs more time to adjust and recover."

With that scenario in mind, the "exchange rate of the US dollar will relate closely to the stock market as well as prices of commodities such as crude oil and it's too early to say the economy is recovering" strongly, the report said.

China cut its holdings of US Treasury bills in June by the largest amount in nearly nine years in an effort to diversify its foreign reserves. China held US$776 billion of Treasury bills at the end of June, down 3.1 percent from May.

But the country still remains the largest holder of US Treasuries.


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