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Yuan rose to break 6.6 per dollar, highest since 1993
By Zhang Fengming |
December 31, 2010, Friday
|
Online Edition
Online Edition
THE yuan rose beyond 6.6 against US dollar for the first time since 1993 on speculation that a more valuable yuan is needed to tame inflation.
The local currency rose to an intraday high of 6.5896 today, the strongest level since China unified official and market exchange rates at the end of 1993. Its annual gain in 2010 sat at 3.6 percent.
The yuan ended at 6.5897 against the greenback today, according to the China Foreign Exchange Trading System.
The People's Bank of China today put the central parity rate at 6.6227, the ninth day increase. The yuan is allowed to trade within a daily trading band of 0.5 percent on the central parity rate.
"A faster appreciation of the yuan is widely expected to curb inflation," said Lu Zhengwei, an Industrial Bank senior economist. "Caution on imported inflation against high crude prices is driving up the yuan."
A more valuable yuan can make imports cheaper, and in turn curb inflation.
"Considering that it takes six months to 12 months for the currency to effect on inflation, it's reasonable to see a faster appreciation of the currency earlier," Lu said.
Stephen Green, head of research at Standard Chartered Bank China, also said he expected a faster, or 6 percent, appreciation of the yuan in 2011 to tame inflation.
The consumer price index, the main gauge of inflation, rose to 5.1 percent in November, a 28-month high. Food prices jumped 11.7 percent last month, also the most since July 2008.
Chinese consumers are feeling the biggest pressure of rising cost of living in a decade, a central bank survey showed in December.
The country's consumer satisfaction index fell to 13.8 percent in the quarter, the lowest since data were complied in the fourth quarter of 1999, said the survey.
China has already fired bullets to curb inflation, including two interest rates increases and six reserve requirement ratio increases in 2010.
The central bank raised its interest rates on December 25, the second raise in more than two months.
The one-year benchmark deposit rate now sits at 2.75 percent after 0.25 percentage points rise, while the one-year benchmark lending rate gained by the same 25 basis points to 5.81 percent.
The Christmas Day rates increase showed that the central bank is front-loading measures to fight inflation.
At the annual Central Economic Work Conference concluded on December 12, China's top leaders set the economic policies for the first year of the 12th Five-Year Plan -- there were scant worries over growth, but plenty over inflation and the need to counter the US's new round of quantitative easing, or QE2, as the market calls it.
The local currency has gained more than 25 percent since July 2005 when yuan dropped its peg to the US dollar.
The local currency rose to an intraday high of 6.5896 today, the strongest level since China unified official and market exchange rates at the end of 1993. Its annual gain in 2010 sat at 3.6 percent.
The yuan ended at 6.5897 against the greenback today, according to the China Foreign Exchange Trading System.
The People's Bank of China today put the central parity rate at 6.6227, the ninth day increase. The yuan is allowed to trade within a daily trading band of 0.5 percent on the central parity rate.
"A faster appreciation of the yuan is widely expected to curb inflation," said Lu Zhengwei, an Industrial Bank senior economist. "Caution on imported inflation against high crude prices is driving up the yuan."
A more valuable yuan can make imports cheaper, and in turn curb inflation.
"Considering that it takes six months to 12 months for the currency to effect on inflation, it's reasonable to see a faster appreciation of the currency earlier," Lu said.
Stephen Green, head of research at Standard Chartered Bank China, also said he expected a faster, or 6 percent, appreciation of the yuan in 2011 to tame inflation.
The consumer price index, the main gauge of inflation, rose to 5.1 percent in November, a 28-month high. Food prices jumped 11.7 percent last month, also the most since July 2008.
Chinese consumers are feeling the biggest pressure of rising cost of living in a decade, a central bank survey showed in December.
The country's consumer satisfaction index fell to 13.8 percent in the quarter, the lowest since data were complied in the fourth quarter of 1999, said the survey.
China has already fired bullets to curb inflation, including two interest rates increases and six reserve requirement ratio increases in 2010.
The central bank raised its interest rates on December 25, the second raise in more than two months.
The one-year benchmark deposit rate now sits at 2.75 percent after 0.25 percentage points rise, while the one-year benchmark lending rate gained by the same 25 basis points to 5.81 percent.
The Christmas Day rates increase showed that the central bank is front-loading measures to fight inflation.
At the annual Central Economic Work Conference concluded on December 12, China's top leaders set the economic policies for the first year of the 12th Five-Year Plan -- there were scant worries over growth, but plenty over inflation and the need to counter the US's new round of quantitative easing, or QE2, as the market calls it.
The local currency has gained more than 25 percent since July 2005 when yuan dropped its peg to the US dollar.
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