China's currency strengthened on Friday to its highest level
against the US dollar since its revaluation on July 21 last year on
heightened market forces, a weakened dollar and technical
rebounds.
The China Foreign Exchange Trade System announced the daily
benchmark, or the central parity rate for the dollar was 8.0286
yuan, falling for the first time below 8.03 yuan.
The Chinese currency, also known as renminbi or RMB, has gained
nearly 1 percent against the dollar following a 2 percent
revaluation, with the biggest daily increase charted on
Wednesday.
The (PBoC), or the country's central bank, early this year
began a new policy of calculating the yuan's value against the US
dollar using a weighted average of the prices given by major banks.
The highest and lowest offers are excluded from the
calculation.
Giving banks a role in setting the daily exchange rate is seen
as a sign that the central bank is willing to allow market forces a
greater role in daily trading, analysts acknowledge.
In an interview with Xinhua, finance analyst Tan Yaling with
Bank of China agreed the yuan's recent rises show the market is a
more important decider for its value.
She echoed the claim by Premier Wen
Jiabao at a press conference at the annual session of China's
top legislature earlier this week that "Renminbi boasts the room
and capacity for floating up or down by itself in line with current
mechanism and market changes."
Tan said the yuan rise reflects the market confidence in China's
robust economic prospects and long-run investment yields, citing
the country's ample foreign exchange reserves, stable trade growth
and increased market transparency.
It is also brought by the dollar's weakening against other major
world currencies on lower-than-expected economic figures provided
by the US government and a rebound after unexpected declines
earlier this week, she said.
The US pressure on China's currency issue built up as China's
trade surplus with the United States hit a new high in 2005.
Statistics provided by China and the United States differ
significantly. China said the total trade surplus with other
countries came to US$100 billion last year amid increasing trade
disputes.
Foreign exchange reserves surged to US$818.9 billion by the end
of last year -- second only to Japan -- largely as a result of
skewed trade and foreign exchange management.
US senators Charles Schumer, Lindsey Graham and Tom Coburn, who
are leading an effort to force trade and currency "concessions"
from China, will be reportedly in China next week to discuss
growing concerns in the US Congress about Chinese trade practices,
currency policy and intellectual property rights.
The visit comes as the Senate nears a March 31 deadline for a
vote on a bill written by Schumer and Graham that would impose a
high tariff on Chinese goods to counter what they call artificial
currency exchange rates that benefit Chinese manufacturers at the
expense of American producers.
"We thought it was the right time to figure out where the
Chinese are headed on this issue and other issues, like
intellectual property and port security," Schumer said.
The PBoC, however, reiterated in its annual monetary report
released at the end of February that the yuan will remain
"basically stable" at a reasonable, balanced level this year.
The "independent, controllable, progressive" way whereby China
reforms its currency system will continue, while priority will be
placed on promoting balanced international payments, it said.
The bank emphasizes a floating yuan is not simply one that will
appreciate, but the prevailing view among industry watchers is that
the yuan will strengthen gradually in 2006.
Tan said she believed the US dollar would be traded at around
eight yuan this year, and in the first six months gains would
outweigh losses for the yuan.
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(Xinhua News Agency March 18, 2006)