Yuan falls on strong demand for dollar
By Feng Jianmin |
01:19 UTC+8 November 4, 2011
|
Print Edition
Print Edition
THE yuan hit the lower end of its trading limit on strong demand for the US dollar yesterday despite the Chinese central bank setting the central parity rate at its strongest point in six years.
The People's Bank of China yesterday set the reference rate 0.16 percent stronger at 6.3198 yuan per dollar, the highest level since July 2005, after Zhang Tao, director-general of the international department of the central bank, said the government would continue its efforts to further increase the yuan's flexibility.
Zhang made the comments ahead of the Group of 20 summit in Cannes, France.
"The central bank usually allows the yuan to appreciate a bit faster each year ahead of the G20 meeting to reveal its stance," said Huang Dongqi, a senior researcher at the Industrial and Commercial Bank of China.
"A gradual appreciation of the yuan will remain the central bank's strategy for the sake of improving the domestic economic structure and the internationalization of the yuan," Huang said.
But the yuan closed weaker at 6.3514 against the dollar in Shanghai, touching the lower limit of daily fluctuation, according to the China Foreign Exchange Trade System.
Investors are allowed to trade the yuan within a range of 0.5 percent on each side of the central parity rate.
Traders said that strong demand for the US dollar weighed down the yuan during the trading, as the currency is stronger in the domestic market than in Hong Kong. Investors could therefore make profits by buying the US dollar on Chinese mainland and then selling it offshore.
The People's Bank of China yesterday set the reference rate 0.16 percent stronger at 6.3198 yuan per dollar, the highest level since July 2005, after Zhang Tao, director-general of the international department of the central bank, said the government would continue its efforts to further increase the yuan's flexibility.
Zhang made the comments ahead of the Group of 20 summit in Cannes, France.
"The central bank usually allows the yuan to appreciate a bit faster each year ahead of the G20 meeting to reveal its stance," said Huang Dongqi, a senior researcher at the Industrial and Commercial Bank of China.
"A gradual appreciation of the yuan will remain the central bank's strategy for the sake of improving the domestic economic structure and the internationalization of the yuan," Huang said.
But the yuan closed weaker at 6.3514 against the dollar in Shanghai, touching the lower limit of daily fluctuation, according to the China Foreign Exchange Trade System.
Investors are allowed to trade the yuan within a range of 0.5 percent on each side of the central parity rate.
Traders said that strong demand for the US dollar weighed down the yuan during the trading, as the currency is stronger in the domestic market than in Hong Kong. Investors could therefore make profits by buying the US dollar on Chinese mainland and then selling it offshore.
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