Foreign Exchange News
- Yuan has its largest advance in a month
Date: 28-Nov-2006 Sources: (Shenzhen Daily)
THE yuan had its largest gain in a month yesterday after Asian currencies, which the People's Bank of China uses to guide its exchange rate, rose against the U.S. dollar.
China also may be more willing to let its currency strengthen before U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke meet with Chinese officials next month, said Xiao Minjie, a senior economist at Daiwa Institute of Research.
'China may want to cooperate with the United States and it also wants to resolve its problem of excess liquidity,'' Shanghai-based Xiao said. 'Besides political factors, the global dollar's performance also has a hand to play in strengthening the yuan.''
The yuan gained 0.14 percent to 7.8417 against the dollar yesterday morning, the biggest advance since Oct. 30, according to the China Foreign Exchange Trade System. The currency climbed as high as 7.8402, the strongest since the end of the fixed exchange rate in July 2005. It may rise to 7.75 by the end of the first quarter, Xiao said.
All but one of the 15 major Asia Pacific currencies rose against the U.S. dollar yesterday.
A rising yuan helps slow exports and prevent the trade gap from widening and pushing up China's foreign-exchange reserves.
Central bank deputy governor Wu Xiaoling said last week the central bank may sell more currency swaps to mop up excess yuan from the banking system.
The People's Bank of China fixed the reference rate for yuan trading at 7.8402 against the dollar yesterday, the highest since the government dropped its fixed exchange rate policy July 21, 2005.
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