China's yuan surges in value to 6.5997 per dollar

11:01, January 13, 2011      

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China's currency, the yuan, has gained an impetus to appreciate against the U.S. dollar since 2011, and the country's central bank set the official exchange rate of the two at a record 6.5997 yuan per dollar on Thursday.

The shoot-up of 131 basic points, from 6.6128 per dollar on Wednesday, reflects Beijing's readiness to accelerate reform of its currency exchange rate formation regime. Beijing, buoyed by a rapid economic recovery from the global crisis in 2010, seems now more confident to let the market play a more prominent role in setting the key rates.

China promised more exchange rate flexibility, and the central bank has, since last June, let the yuan rise against the dollar by 3.6 percent. The majority of market watchers expect another 5-10 percent gain of the yuan this year.

Analysts also believe that the policy-makers, concerned by steep price rises of imported goods that exacerbated inflation in China, have settled on a quicker pace of the yuan appreciation to rein in CPI (consumer price index) surging at home. In October and December, the central bank also raised the interest rates twice to control inflation.

Beijing is expected to accelerate the process of making the yuan an international currency on a par with the U.S. dollar, euro or the Japanese yen. Prior to that, it needs to phase in a market-oriented, and gradually market-set, currency exchange rates.

China hasn't set, or revealed, a timetable to make the yuan, also called the Renminbi, freely convertible on the global market, although some countries in Asia are reportedly storing the yuan as reserves. Most analysts say it will take about 5 years for the central bank to promote its currency to the world, testing the waters of market demand, before expanding the process of the yuan globalization and letting it become a hard currency.

By People's Daily Online


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