Yuan tumbles in intraday trade
By Lu Nengneng |
April 28, 2012, Saturday
|
Print Edition
Print Edition
THE yuan experienced its biggest daily fluctuation yesterday despite the central bank setting central parity at a record high for a second straight day - a sign that the currency is gaining in flexibility.
The People's Bank of China set the central parity rate at 6.2787 against the dollar, the highest since 2005 when the yuan's peg to the greenback was scrapped.
The currency fell 0.07 percent to close at 6.3102 per dollar in Shanghai, according to the China Foreign Exchange Trading System. In intraday trading, the yuan dropped as low as 0.53 percent, the first time it had tumbled more than 0.5 percent since April 16 when China doubled the yuan's daily trading band to 1 percent from 0.5 percent to lend the currency more flexibility.
"As the trading band is doubled, the central parity rate's decisive play on the rate is weakened," said Tommy Xie, an OCBC Bank economist.
The central bank sets the central parity rate each day and the value of the yuan can rise or fall as much as 1 percent during intraday trading. The rate usually reflects China's attitude toward the currency's value.
Yi Gang, a deputy central bank governor, said this week that it was time for the market to decide the value of the currency. The State Administration of Foreign Exchange said on Thursday that trading was more active while the exchange rate had remained "stably fluctuated" since April 16.
Slow economic recovery in the United States and the escalating debt crisis in Europe prompted some foreign capital to turn back to emerging markets like China.
Hu Yanni, an analyst at China Securities Co, said the high central parity rate was within expectation as yuan funds accumulated from foreign exchange rose for a third consecutive month in March by more than 100 billion yuan, indicating still strong inflow of capital into China.
The People's Bank of China set the central parity rate at 6.2787 against the dollar, the highest since 2005 when the yuan's peg to the greenback was scrapped.
The currency fell 0.07 percent to close at 6.3102 per dollar in Shanghai, according to the China Foreign Exchange Trading System. In intraday trading, the yuan dropped as low as 0.53 percent, the first time it had tumbled more than 0.5 percent since April 16 when China doubled the yuan's daily trading band to 1 percent from 0.5 percent to lend the currency more flexibility.
"As the trading band is doubled, the central parity rate's decisive play on the rate is weakened," said Tommy Xie, an OCBC Bank economist.
The central bank sets the central parity rate each day and the value of the yuan can rise or fall as much as 1 percent during intraday trading. The rate usually reflects China's attitude toward the currency's value.
Yi Gang, a deputy central bank governor, said this week that it was time for the market to decide the value of the currency. The State Administration of Foreign Exchange said on Thursday that trading was more active while the exchange rate had remained "stably fluctuated" since April 16.
Slow economic recovery in the United States and the escalating debt crisis in Europe prompted some foreign capital to turn back to emerging markets like China.
Hu Yanni, an analyst at China Securities Co, said the high central parity rate was within expectation as yuan funds accumulated from foreign exchange rose for a third consecutive month in March by more than 100 billion yuan, indicating still strong inflow of capital into China.
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