Foreign Exchange News
- RMB hits new high against U.S. dollar, breaking 7.74 mark
Date: 8-Mar-2007 Sources: (Xinhua Online)
The value of the Chinese yuan against the U.S. dollar hit a new high on Thursday with a central parity rate of 7.7386 yuan to the dollar, according to the Chinese Foreign Exchange Trading System.
The yuan, also known as the Renminbi (RMB), gained 50 basis points from Wednesday's reference rate of 7.7436 to the U.S. dollar.
The yuan has gained 701 basis points since the beginning of 2007 from 7.8087 yuan against the dollar on Dec. 29, 2006.
There had been speculation over whether the yuan would see a sharp appreciation on Wednesday afternoon when the U.S. Treasury Secretary Henry Paulson began his third China trip in seven months in preparation for the second round of the China-U.S. Strategic Economic Dialogue scheduled for May in Washington.
But insiders also put the continuous appreciation of the RMB down to the weak U.S. dollar on the international market.
Zhou Xiaochuan, governor of the People's Bank of China, or the central bank, fueled speculation over a widening of the RMB exchange rate band by saying China could widen the floating band of the RMB exchange rate in 2007.
'This year (China) will not rule out the possibility of expanding the floating band of the RMB exchange rate when necessary,' Zhou was quoted as saying earlier in the week.
The value of the RMB has risen more than six percent since July21, 2005, when the Chinese government launched the reform of the exchange rate system to allow the yuan to float against the U.S. dollar within a daily band of 0.3 percent around the official central parity rate.
'Faced with the ever-changing international and domestic markets, we will further the progress of forex rate reform, making a more flexible RMB exchange rate system,' Zhou said.
Chinese Premier Wen Jiabao said on Monday the nation would improve the mechanism for setting the RMB exchange rate and seek ways to use the massive state foreign exchange reserves appropriately.
Wen made the statement while delivering a government work report at the opening of the Fifth Session of the Tenth National People's Congress, the top legislature.
China's foreign exchange reserves reached 1.066 trillion U.S. dollars at the end of 2006, up from 212.2 billion dollars at the end of 2001, according to the People's Bank of China.
The huge foreign exchange reserves have also been regarded as one of the major factors behind the appreciation of RMB.
The yuan gained 76 basis points to reach a central parity rate of 0.99000 yuan to the Hong Kong Dollar on Thursday, and gained 587 basis points to reach a central parity rate of 14.9221 yuan against the British Pound.
But it lost 416 basis points to hit a central parity rate of 6.6816 yuan to the Japanese Yen, and dived 202 basis points to reach a central parity rate of 10.1904 yuan to the euro.
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