China's yuan climbed as high as 8.1030 and finally closed at 8.1032 to the US dollar on Tuesday, recording a post-revaluation high for the fourth straight session as dealers gained confidence that the central bank would allow small gains, Reuters reported.
The previous day's closing rate was 8.1046 yuan to the dollar.
Dealers said the dollar's weakness against the euro and the yen was the primary reason for the yuan's rise on Tuesday.
The , China's central bank, has been giving the currency room to rise by small increments. Dealers said this has given the market some confidence that Beijing would not step in to curtail a gradual appreciation of the currency, which was revalued on July 21.
"Although very tiny, gains over past days have amounted to a further appreciation, indicating the central bank is giving the market larger leeway to trade the yuan," according to the Reuters report quoting a dealer from a foreign bank..
"And that will benefit China a lot; relieving international pressure for further revaluations and preparing its banks and companies for the impact of an increasingly flexible forex regime," the report said.
But others remain wary of pushing the currency too far too fast.
"The yuan's strength today was more or less in line with the dollar's weakening on global markets," said a Shanghai-based dealer at Bank of China, the country's top foreign exchange bank.
Although China's central bank says the yuan is tracking a basket of currencies, most dealers think that basket is mostly full of dollars, according to the report.
"We believe the dollar still accounts for the lion's share in a package of currencies the yuan is now linked to, so the domestic market is mainly following dollar movements," said a dealer at a foreign bank.
The initial revaluation to 8.11 per dollar from a long-standing trading mid-point of 8.2780 amounted to a 2.07 percent increase in value. After more than a week of micro moves, mostly upward, the gain has been extended to 2.16 percent.
The daily range remains narrow because traders fear that buying the yuan at high prices might prompt official selling that would drive the thinly traded currency lower again, Reuters reported.
(China Daily August 4, 2005)
