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China sets stronger parity level for yuan
By Maggie Zhang |
February 10, 2011, Thursday
|
Print Edition
Print Edition
CHINA set a stronger central parity of its currency on the first trading day following its second rate increase in just over six weeks as a stronger yuan is expected to tame inflation by making imports cheaper.
The People's Bank of China set the yuan's central parity rate at 6.5850 against the US dollar yesterday, up 0.15 percent from the last trading day before the Spring Festival holiday.
The yuan ended at 6.5938 in Shanghai yesterday, according to the China Foreign Exchange Trade System. The yuan is allowed to trade 0.5 percent on each side of the central parity rate, or the daily fixing.
The one-year key deposit rate is now 3 percent, up from 2.75 percent, while the one-year key lending rate rose by the same 25 basis points to 6.06 percent.
"Despite the central government's reluctance to allow currency appreciation as an effective monetary policy tool, we think a further yuan rise will manage external driven liquidity in addition to boosting imports and encouraging local corporations to invest overseas," said Tommy Xie, an OCBC Bank economist.
Xie said he expects the yuan to break 6.35 to the dollar this year.
The Consumer Price Index rose 4.6 percent in December, easing from a 28-month high of 5.1 percent in November. Economists said the CPI could rise past 5.1 percent in January as yesterday's interest rate hike signaled inflation may have exceeded November's figure.
The People's Bank of China set the yuan's central parity rate at 6.5850 against the US dollar yesterday, up 0.15 percent from the last trading day before the Spring Festival holiday.
The yuan ended at 6.5938 in Shanghai yesterday, according to the China Foreign Exchange Trade System. The yuan is allowed to trade 0.5 percent on each side of the central parity rate, or the daily fixing.
The one-year key deposit rate is now 3 percent, up from 2.75 percent, while the one-year key lending rate rose by the same 25 basis points to 6.06 percent.
"Despite the central government's reluctance to allow currency appreciation as an effective monetary policy tool, we think a further yuan rise will manage external driven liquidity in addition to boosting imports and encouraging local corporations to invest overseas," said Tommy Xie, an OCBC Bank economist.
Xie said he expects the yuan to break 6.35 to the dollar this year.
The Consumer Price Index rose 4.6 percent in December, easing from a 28-month high of 5.1 percent in November. Economists said the CPI could rise past 5.1 percent in January as yesterday's interest rate hike signaled inflation may have exceeded November's figure.
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