Yuan climbs to an 18-year high
By Staff Reporter |
February 11, 2012, Saturday
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Print Edition
Print Edition
THE yuan rose to its strongest level against the US dollar in 18 years yesterday amid an unexpected rise in the trade surplus and a fall in new bank loans in January.
Analysts said that a mild yuan appreciation against the greenback will be sustained because of the outlook for a relatively tight monetary policy in China and a loose one in the US, but larger flexibility should be applied to avoid harming China's exports.
China's central bank set the yuan's central parity rate 0.11 percent stronger at 6.2937 yuan to the dollar. The rate represented a peak since China started to allow trading of the yuan in 1994.
Also yesterday, the government reported that both exports and imports decreased in January from a year earlier, while the trade surplus hit US$27.2 billion, exceeding market expectations.
Meanwhile, the central bank noted in a statement that China's commercial banks had extended a combined 738.1 billion yuan's worth of new yuan loans in January, 288.2 billion yuan less than January last year.
Economists said the reduction was mainly due to the weeklong Chinese New Year break. But it was still below market expectations, signaling that the People's Bank of China is still cautious in its monetary policy after seeing inflation rebound to the quickest in three months in January.
"It seems that the central bank has ordered banks to control the increase of lending at a reasonable pace," said E Yongjian, an economist with the Bank of Communications. "There will be no large-scale loosening of credits this year."
He said that he did not expect China to cut interest rates unless the economy encounters severe negative impacts.
Market watchers have noted that speculation for depreciation of the yuan is starting to ebb on the offshore yuan market, as investors hold a stable outlook for China's economy.
The strengthening coincides with stronger performance of other non-US currencies as Europe on Thursday decided to keep its key interest rate unchanged, and as Greece edged closer to receiving a bailout after agreeing to more austerity cuts.
Economists also said that Vice President Xi Jinping's coming visit to the United States may accelerate the appreciation of the yuan in the short term, but the currency will restore its normal path once the visit is over.
The ANZ Bank said in a report yesterday that the yuan appreciated 0.018 percent a day, on average, from July 2010 to the end of 2011. That was slightly slower than the average appreciation in a short period before eight key events, which included meetings between government leaders and significant global meetings.
Analysts said that a mild yuan appreciation against the greenback will be sustained because of the outlook for a relatively tight monetary policy in China and a loose one in the US, but larger flexibility should be applied to avoid harming China's exports.
China's central bank set the yuan's central parity rate 0.11 percent stronger at 6.2937 yuan to the dollar. The rate represented a peak since China started to allow trading of the yuan in 1994.
Also yesterday, the government reported that both exports and imports decreased in January from a year earlier, while the trade surplus hit US$27.2 billion, exceeding market expectations.
Meanwhile, the central bank noted in a statement that China's commercial banks had extended a combined 738.1 billion yuan's worth of new yuan loans in January, 288.2 billion yuan less than January last year.
Economists said the reduction was mainly due to the weeklong Chinese New Year break. But it was still below market expectations, signaling that the People's Bank of China is still cautious in its monetary policy after seeing inflation rebound to the quickest in three months in January.
"It seems that the central bank has ordered banks to control the increase of lending at a reasonable pace," said E Yongjian, an economist with the Bank of Communications. "There will be no large-scale loosening of credits this year."
He said that he did not expect China to cut interest rates unless the economy encounters severe negative impacts.
Market watchers have noted that speculation for depreciation of the yuan is starting to ebb on the offshore yuan market, as investors hold a stable outlook for China's economy.
The strengthening coincides with stronger performance of other non-US currencies as Europe on Thursday decided to keep its key interest rate unchanged, and as Greece edged closer to receiving a bailout after agreeing to more austerity cuts.
Economists also said that Vice President Xi Jinping's coming visit to the United States may accelerate the appreciation of the yuan in the short term, but the currency will restore its normal path once the visit is over.
The ANZ Bank said in a report yesterday that the yuan appreciated 0.018 percent a day, on average, from July 2010 to the end of 2011. That was slightly slower than the average appreciation in a short period before eight key events, which included meetings between government leaders and significant global meetings.
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