Real effective yuan rate falling for 2 consecutive months

10:57, August 17, 2010      

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The real effective yuan exchange rate has maintained a falling trend in July, sliding nearly 1 percent in July, according to the newest statistics from the Bank for International Settlements.

The nominal effective exchange rate, or its value against a trade-weighted basket of currencies, depreciated 1.44 percent in July over June. The discrepancy between real and nominal yuan exchange rate shows the different inflation situations between China and its major trade partners, including the United States, Japan and the European Union.

Analysts believe that the fall of real effective yuan exchange rate was related to the strength of the euro and the British pound.

China restarted the reform of yuan exchange rate regime in June and now uses a basket of foreign currencies. In July, major currencies such as the euro and yen, which are in China's foreign currencies "basket," climbed slightly against the dollar, leading to the depreciation of real effective yuan exchange rate.

Hu Xiaolian, deputy governor of China's central bank, said in her articles in July that China may try releasing the nominal effective exchange rate of the yuan on a regular basis. This will guide the public not to focus only on the yuan exchange rate against the U.S. dollar and gradually use the effective exchange rate as a reference system of the yuan exchange rate level and the reference for financial regulations.

By People's Daily Online


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