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China's yuan closes at new high vs dollar
(AP)
Updated: 2006-01-20 16:54
In its biggest one-day shift since a revaluation six months ago, China's
currency surged Friday to a new high against the U.S. dollar.
The yuan closed at 8.0601 on the automatic price-matching system after
trading in a range of 8.0639 to 8.0601, traders said. The yuan closed Thursday
at 8.0673.
Rising short-term interest rates in China encouraged market participants to
sell dollars for yuan and the central bank did not try to prevent its rise, some
traders said.
On the stock exchange, the seven-day repurchase agreement rate, a benchmark
for short-term rates, ended at 5.495 percent, sharply higher than Thursday's
close of 4.555 percent.
At 0730 GMT, the dollar was trading at 8.0610 on the over-the-counter market.
It closed Thursday at 8.0665.
China revalued the yuan by 2 percent last July, to 8.11 yuan to the dollar.
At the same time, it also shifted to basing the yuan's value on a basket of
major currencies including the dollar. But the yuan's movements are kept within
a narrow range of 0.3 percent above or below its opening level.
The yuan has risen by 0.6 percent since July's revaluation. It began
trading Friday at 8.0648 to the dollar.
China has indicated it will resist pressure from the United States and other
trading partners for major currency shifts, despite arguments that the yuan
remains undervalued, making Chinese-made goods artificially cheap in overseas
markets.
On Friday, China Economic Times carried an article by a prominent government
economist acknowledging that the yuan remains undervalued.
But Zhu Baoliang, chief economist at the State Information Center, a think
tank within the state planning agency, said Beijing could not afford to let the
yuan's value rise by much because it needs to keep exports strong both to absorb
excess factory output and to contain unemployment.
Zhu forecast that China's foreign exchange reserves, which surged to US$818.9
billion (euro678 billion) last year, would rise this year to US$950 billion
(euro787 billion).
The rate of increase in China's trade surplus, which more than tripled in
2005 to US$102 billion, is expected to moderate, with the surplus in 2006 likely
to be around US$110 billion (euro90 billion), Zhu wrote.
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