Yuan gained 24%, 14% against dollar, euro since 2005 reform

17:19, December 28, 2010      

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As of the end of November 2010, the value of the yuan, China's currency, has appreciated nearly 24 percent against the U.S. dollar and 14 percent against the euro incrementally since China launched the reform of its foreign exchange rate regime in 2005, according to a report by Hu Xiaolian, deputy governor of the People's Bank of China, the central bank.

Data from the Bank for International Settlements shows that as of the end of November 2010 the nominal effective exchange rate of the yuan has increased by 13.6 percent and the real effective exchange rate has risen by 21.2 percent since the 2005 reform.

On Tuesday the central parity rate of the renminbi was set at 6.6252 per U.S. dollar Tuesday, stronger than Monday's 6.6305. It is also the sixth consecutive trading day that the yuan has gained against the dollar.

China announced on Saturday last week to raise its benchmark interest rates. The market began anticipating a strong yuan after that.

Hu's article also hailed the breakthrough on making a more international yuan. The cross-border RMB-denominated trade settlement, which started in September 2009, has been going smoothly and expanding. By the end of November 2010, banks had completed 388 billion yuan of such business. In addition, the cross-border yuan-denominated investment and financing trial project had reached more than 55 billion yuan by the end of November 2010.

However the dual surplus on China's capital account and current account has put great pressure on China's liquidity management. The central bank will use all the three of its tools — banks' deposit-reserve ratios, interest rates and foreign exchange rates — to bring the monetary policy back to normal, that is to say a prudent monetary policy in 2011.


By Li Jia, People’s Daily Online
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