The yuan climbed to another record high on the last trading day
before the golden week May Day holiday break on bullish sentiment
and speculation the central bank will allow further rises as it
tries to cool the economy.
The Chinese currency settled at 7.7039 against the US dollar,
the highest since China abandoned the decade-long fixed exchange
rate of 8.28 to the US currency on July 21, 2005. The People's Bank
of China set the parity rate at 7.7055, beating the earlier record
of 7.7139 on Friday.
"Optimism is high before the holiday break, and the market is
expecting a further appreciation (of the yuan) as the central bank
moves to slow the economy," said Xie Zengling, a Shanghai-based
trader at Bank of China.
The central bank on Sunday ordered lenders to set aside more
money as reserves for the seventh time in 11 months to rein in
lending.
The reserve ratio - the amount of money a bank must keep at the
central bank - will rise 0.5 percentage point to 11 percent on yuan
deposits starting on May 15.
Analysts have already predicted more measures by the central
bank including a rise in reserve requirement, a higher interest
rate this year, as well as a more flexible yuan to slow the economy
which expanded by a faster-than-expected 11.1 percent in the first
quarter.
The country's trade surplus soared to US$46.4 billion through
March, up US$23.1 billion year on year.
(Shanghai Daily May 1, 2007)