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Yuan expected to fluctuate, rise more this year (2)

By Gao Changxin  (China Daily)

11:09, January 06, 2012

Wider fluctuations, he said, will help improve China's system for setting exchange rates, lower the expectations for the yuan's appreciation and stabilize the currency's real effective exchange rate.

An effective exchange rate is a weighted average of the values of various foreign currencies and is viewed as the best way to gauge the purchasing power of a country's currency in comparison with its trading partners' currencies.

"That, in turn, will benefit Chinese exports and the yuan's independence," he said.

The value of the currency became more volatile in December, touching the bottom of its daily trading range on 12 days of the 22 trading days in that month. It also posted its biggest one-day gain of 0.4 percent on Dec 16 before attaining a record high exchange rate on Dec 27.

Chen said the yuan should be pegged to a basket of currencies instead of just to the US dollar. That's because China's current account has already become "basically balanced", and the country should shift its policy toward making the yuan's effective exchange rate stable.

【1】 【2】 【3】

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