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Yuan may rise in March: analyst
By Zhang Fengming |
January 27, 2010, Wednesday
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Online Edition
Online Edition
THE Chinese yuan is expected to appreciate as early as in March as exports pick up, economists said today.
Economists from Calyon said they expect the local currency to resume appreciation at the end of the first quarter or in the second quarter. Most economists expect the move in the second half.
"We're slightly more aggressive than the consensus on the Chinese yuan," said Sebastien Barbe, head of emerging market research and strategy at Calyon. "We believe an early move is wiser on the positive signs of exports and the need to lock market expectation of the yuan's appreciation."
Speculative money started to flow into China on strong economic growth in the second half of 2009. The capital inflow has pumped up liquidity in China, pushing authorities to roll out a series of tightening measures to siphon excess money.
"There's a risk of a vicious circle -- more sterilization including interest rates hikes, which can further shore up the returns on hot money and further attract speculative capital," Barbe said.
"We think one way, maybe the only way, to put a brake on the vicious circle is to appreciate the yuan as early as possible to send A signal to the market that China will take a gradual appreciation mode," he said.
The yuan has been flat at about 6.83 to the US dollar since the middle of 2008.
Economists from Calyon said they expect the local currency to resume appreciation at the end of the first quarter or in the second quarter. Most economists expect the move in the second half.
"We're slightly more aggressive than the consensus on the Chinese yuan," said Sebastien Barbe, head of emerging market research and strategy at Calyon. "We believe an early move is wiser on the positive signs of exports and the need to lock market expectation of the yuan's appreciation."
Speculative money started to flow into China on strong economic growth in the second half of 2009. The capital inflow has pumped up liquidity in China, pushing authorities to roll out a series of tightening measures to siphon excess money.
"There's a risk of a vicious circle -- more sterilization including interest rates hikes, which can further shore up the returns on hot money and further attract speculative capital," Barbe said.
"We think one way, maybe the only way, to put a brake on the vicious circle is to appreciate the yuan as early as possible to send A signal to the market that China will take a gradual appreciation mode," he said.
The yuan has been flat at about 6.83 to the US dollar since the middle of 2008.
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