The exchange rate of the Renminbi against the US dollar climbed
a further two basis points to a new high of 7.7613 yuan to one
dollar on Friday, according to the Shanghai-based China Foreign
Exchange Trading System.
The yuan also gained 82 basis points against the euro and seven
basis points against the Japanese yen. But it lost a little ground
on the HK dollar, falling 13 basis points.
On Thursday, the RMB broke the 7.77-yuan mark for the first
time, ending the day's trading at 7.7615 yuan to the dollar. The
rise of 161 basis points was the largest appreciation in a single
day since China reformed its exchange rate system in July 2005 to
allow the yuan to float against the US dollar within a daily 0.3
percent band from the official central parity rate.
"The sharp increase could have been due to the fact that the
Federal Reserve announced it would continue to freeze interest
rates and Wednesday's comments by the US Treasury Secretary Henry
Paulson that the appreciation of the yuan should be accelerated,"
said a forex trade dealer with the Bank of China on condition of
anonymity.
However, Liu Yuhui, head of the economic evaluation center of
the Research Institute of Finance under the Chinese Academy of
Social Sciences, disagreed. He believed the proximity of the rapid
appreciation to Paulson's comments was mere coincidence.
"The upward trend of the value of the RMB has already taken
shape. What happens in the outside world will not affect the
overall movement of the local currency," Liu said.
"Since the RMB broke the 8-yuan mark, it has been appreciating
in a more active way," Liu added.
Liu pointed out that for a long period of time after the forex
reform began, the value of the RMB was raised by the weakening
trend of the US dollar. But since the fourth quarter of last year,
the RMB's appreciation has often concurred with a stronger US
dollar.
"It seems that the forex rate, as an instrument to regulate the
macro economy and improve the international balance sheet, is being
taken into consideration more often by industry watchdogs," Liu
noted.
As dealers anticipate the continuation of the yuan's
appreciation, they are more prone to selling?US dollars. This
in turn helps raise the value of the yuan, market observers
say.
However, only when market expectation diverges will the price of
a financial product fluctuate by big margins, according to Liu.
"If all dealers expect the RMB to continue appreciating, it
wouldn't make sense to allow the local currency to float against
the US dollar within a larger daily band," Liu commented.
(Xinhua News Agency February 3, 2007)