China's currency strengthened to its highest level against the US dollar yesterday since its July 21 revaluation.
The China Foreign Exchange Trade System announced that the central parity rate for the dollar was 8.0472 yuan - less than 8.05 yuan for the first time.
The Chinese currency has gained an accumulated 2.77 percent against the dollar from its before-revaluation value.
The People's Bank of China (PBOC), the country's central bank, early this year began a new policy of calculating the Renminbi'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 new daily benchmark, or the central parity rate, is seen as a sign that the central bank is willing to allow market forces a greater role in daily trading, analysts acknowledge.
The United States argues that the yuan is artificially low, giving Chinese exporters an unfair advantage, contributing to US trade deficits and hurting US labour markets.
China has said it places priority on promoting balanced international payments this year.
Earlier government figures show China's trade surplus came to US$100 billion in 2005 amid increasing trade disputes.
As a result, the country's foreign exchange reserves surged to US$818.9 billion by the end of last year, second only to Japan.
The PBOC has underscored that 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.
(China Daily February 14, 2006)
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