Beijing sets yuan at 6.7858 to dollar, highest since 2005

13:09, July 01, 2010      

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China's central bank set its currency exchange rate at the highest level against the US dollar Thursday, a sign of Beijing's determination to bring more flexibility to its regulated floating system.

The People's Bank of China said it set the central parity rate -- the centre point of the currency's allowed trading bank for the spot market -- at 6.7858 to the dollar, the highest since July 2005 when China started to reform its currency rate formation regime.

Analysts believe that China will experiment with braveness to test the waters of a stronger home currency affecting its exports and its economic growth broadly. When China's currency, the yuan or RMB, gains in value, the country's foreign trade is to be negatively impacted.

Beijing announced on June 19 to restart a process of RMB revaluation, partly because of the mounting domestic pressure of inflation, and also partly to stave off overseas pressure for RMB to rise in value, so that China could buy more foreign products to balance global trade.

Most market observers say Beijing will move carefully with RMB revaluation, and they forecast the dollar versus the RMB rate will possibly reach 1 : 6.66 by the end of this year, roughly rising 2.8 percent, according to an earlier survey.

U.S. President Barack Obama, facing angry lawmakers who want to slap China with sanctions for what they say is “currency manipulation” that has given it an unfair trade edge, said Sunday during the G-20 summit in Toronto, Canada, that he expected Beijing to "be serious" about its promise to bring more flexibility.

Though the yuan will keep rising at a gradual pace, economists say the spot money market will see moves in both directions – up and down – for the RMB value in the coming trading sessions.

By People's Daily Online


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