Yuan revalues, now 7 to the dollar
Beijing (AsiaNews/Agencies) – Yuan rose to 6.9907 against the US dollar today, a record since its fixed exchange rate was dropped in July 2005, bringing its gain to 18.4 per cent; still the value is too high according to experts.
Last week during talks with Chinese leaders US Treasury Secretary Henry Paulson said that it was “dangerous'” for the exchange rate not to reflect the fundamentals of the world's fastest-growing major economy.
The United States would like the renminbi revalued faster, which would cut its huge deficit vis-à-vis China. Conversely, Beijing is concerned that, too fast, the revaluation might hurt exports. At the same time it has to consider domestic inflation, 8.7 per cent in February, especially in food items. A strong yuan would reduce the cost of food and oil important and cool the economy with anti-inflationary effects, but this in turn might impact negatively those segments of the population on a fixed income.
“China is now under both international and domestic pressure for the yuan to appreciate at a fast pace,” said Liu Dongliang, currency analyst at China Merchants Bank in Shenzhen.
Since July 2005, when the yuan was revalued and its peg to the dollar scrapped, its rise against the dollar has gained pace each year, from 2.6 per cent in 2005 to 3.4 per cent in 2006 and 6.9 per cent last year. So far this year, it is up 4.5 per cent.
The acceleration is partly due to the dollar's weakness in global markets and this is reflected in the yuan’s exchange rate with other currencies. The yuan is in fact down more than 11 per cent against the euro, 11.2 per cent against the yen and 6 per cent against the South Korean won.
Analysts believe that Beijing will slow the appreciation of the yuan in the second half of the year in order to protect is exports since it is not yet showing any signs that it wants remove controls from the economy and allow the market greater leeway.
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11/11/2011
