Yuan breaks through 6.5 dollar mark
By Zhang Fengming |
April 30, 2011, Saturday
|
Print Edition
Print Edition
CHINA'S yuan strengthened beyond 6.5 against the US dollar for the first time since 1993 on expectations of a more valuable yuan to help tame inflation.
The yuan rose 0.1 percent to close at 6.4910 against the United States currency in Shanghai yesterday after touching an intraday high of 6.4892, according to the China Foreign Exchange Trading System. It was the strongest level since China unified official and market exchange rates at the end of 1993.
"One reason for the pick-up of appreciation is that policy makers are more open to use the yuan to tackle inflation compared with previously," said Tommy Xie, an OCBC Bank economist.
The broad US dollar weakness against all 16 major currencies was quoted as another reason.
The People's Bank of China set the central parity rate of the yuan 0.09 percent higher at 6.4990 per dollar, while the currency was headed for a seventh straight weekly gain, its longest winning streak since July 2008. The yuan's trading band sits at 0.5 percent daily.
Sun Lijian, a Fudan University professor, said the central government may turn to the currency more frequently to alleviate the pressure to increase interest rates.
The central bank has started to use a multi-pronged approach to avoid a credit-driven inflation, including raising reserve requirement rates and interest rates to keep inflation in control.
China has raised the interest rates four times since October. The one-year benchmark deposit rate sits at 3.25 at present, still lower than inflation.
China has raised the reserve requirement rates 10 times since 2010 to siphon liquidity. Big banks in China now face a 20.5 percent reserve requirement.
The yuan has advanced 1.5 percent so far this year and economists expect it to appreciate 5 percent to 6 percent for the whole year.
A more valuable yuan can trim the pressure of imported inflation, but may also hurt exports.
According to a Ministry of Commerce survey, the profit margin of the export sector declined from 1.47 percent in 2010 to 1.44 percent over January and February, and many small companies are having difficulty breaking even.
Lu Zhengwei, an Industrial Bank senior economist, yesterday said he translated the rise of yuan these days into better April exports.
China reported its first quarterly trade deficit in seven years for the first quarter as imports outgrew exports by US$1.02 billion.
The yuan rose 0.1 percent to close at 6.4910 against the United States currency in Shanghai yesterday after touching an intraday high of 6.4892, according to the China Foreign Exchange Trading System. It was the strongest level since China unified official and market exchange rates at the end of 1993.
"One reason for the pick-up of appreciation is that policy makers are more open to use the yuan to tackle inflation compared with previously," said Tommy Xie, an OCBC Bank economist.
The broad US dollar weakness against all 16 major currencies was quoted as another reason.
The People's Bank of China set the central parity rate of the yuan 0.09 percent higher at 6.4990 per dollar, while the currency was headed for a seventh straight weekly gain, its longest winning streak since July 2008. The yuan's trading band sits at 0.5 percent daily.
Sun Lijian, a Fudan University professor, said the central government may turn to the currency more frequently to alleviate the pressure to increase interest rates.
The central bank has started to use a multi-pronged approach to avoid a credit-driven inflation, including raising reserve requirement rates and interest rates to keep inflation in control.
China has raised the interest rates four times since October. The one-year benchmark deposit rate sits at 3.25 at present, still lower than inflation.
China has raised the reserve requirement rates 10 times since 2010 to siphon liquidity. Big banks in China now face a 20.5 percent reserve requirement.
The yuan has advanced 1.5 percent so far this year and economists expect it to appreciate 5 percent to 6 percent for the whole year.
A more valuable yuan can trim the pressure of imported inflation, but may also hurt exports.
According to a Ministry of Commerce survey, the profit margin of the export sector declined from 1.47 percent in 2010 to 1.44 percent over January and February, and many small companies are having difficulty breaking even.
Lu Zhengwei, an Industrial Bank senior economist, yesterday said he translated the rise of yuan these days into better April exports.
China reported its first quarterly trade deficit in seven years for the first quarter as imports outgrew exports by US$1.02 billion.
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