Foreign Exchange News
- Yuan posts biggest weekly advance
Date: 16-Jul-2007 Sources: (Shenzhen Daily)
THE yuan ended lower versus the U.S. dollar Friday, consolidating after a surge early in the week, but scored its biggest weekly gain since its revaluation as a record trade surplus boosted pressure for faster appreciation.
The yuan closed at 7.5695 to the dollar, down from Thursday's finish at 7.5673 but managing a gain of 0.41 percent for the week.
Before the start of trade, the People's Bank of China fixed its daily mid-point at 7.5731 to the dollar, up from Thursday's 7.5762.
Dealers expected the yuan to stabilize around 7.5700 in the short term, and a slower pace of gains was seen likely after its quick rise last week, which was fueled in part by global weakness in the dollar.
'I don't see much sign of the yuan breaching 7.5600 in the short term, and the U.S. dollar won't continue its fall against other major currencies,'said a dealer at a major domestic State-owned bank.
The dollar regained some ground Friday after hitting an all-time low against the euro and a 26 year low versus the pound the day before.
Dealers said tightening concerns will be in focus in the coming sessions. The government is set to release major economic data this week.
'Market talk suggests that the June CPI (consumer price index) rise will be close to 4 percent. If this is true, the government will very likely carry out another round of tightening, putting more (upward) pressure on the yuan,'said a Beijing-based trader at a domestic bank.
Dealers said dollar-yuan trading will likely remain fairly quiet early this week, as customer-driven trade is usually lighter mid-month.
The yuan Tuesday and Wednesday marked its biggest two-day gain, 0.51 percent, since the currency was revalued and depegged from the dollar two years ago.
It has risen more than 3 percent so far this year, compared with forecasts by many dealers for a full-year rise around 5 percent.
But analysts said the yuan could rise more quickly after June data released last week showed a record high trade surplus and a surge in foreign exchange reserves, further raising tensions with trading partners who want a faster pace of yuan appreciation.
Data released Thursday showed the U.S. trade deficit rose to US$60 billion in May, while the trade gap with China climbed 3.3 percent to US$20 billion.
Senior U.S. legislators have introduced bills aimed at pressuring China to boost its currency, which they argue gives China a trade advantage by making its exports cheaper.
European Union (EU) officials have also expressed dissatisfaction with rising Chinese exports. European steelmakers are readying requests for anti-dumping duties against surging Chinese imports, saying they will hurt EU prices and firms.
Commerce Minister Bo Xilai told reporters at a briefing in Malaysia on Friday, however, that China trades fairly with the rest of the world and is hoping to narrow its trade surplus.
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