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Yuan hits new high against dollar

By Wang Fei'er (Global Times)

08:32, May 03, 2012

The People's Bank of China, the country's central bank, set the yuan's central parity rate against the dollar at 6.2670 yesterday, a record high since the government rolled out policies aiming at reforming the country's exchange rate mechanism in 2005.

In China's foreign exchange spot market, the central bank sets the central parity rate before the market opens each business day in a bid to rein in the volatility of the yuan's price.

Although the yuan's parity against the dollar has been growing over the past five trading days, experts argue that this rise is only a temporary phenomenon caused by a weakening dollar and the impending balancing of China's international trade.

With the value of China's imports gaining on the value of its exports, some of the pressures which have contributed to the yuan's appreciation are easing, giving the currency limited room to grow further, Nie Riming, a research fellow at the Shanghai Institute of Finance and Law, told the Global Times.

Historically, China's long-term large trade surplus used to stir up cries, especially from the US, calling for the yuan's appreciation, but the nation's balancing trade portfolio has put a damper on these calls in recent months, said Ma Tao, an economist who specializes in currency at Renmin University of China.

The value of the yuan has also gotten a boost recently as slowing economic growth in the US has put a major dent in the strength of the dollar, Ma added.

The US Dollar Index, which tracks the strength of the dollar against a basket of foreign currencies, reached 78.85 yesterday, down 1.23 from April 3.

The US GDP growth rate reached 2.2 percent in the first quarter, lower than the 3 percent growth recorded in the fourth quarter, according to the US Department of Commerce.

Timothy Geithner, the US treasury secretary, reiterated the need to push up the yuan's price shortly before he headed to Beijing for talks with China's leaders on April 27, a day which also marked gains in the yuan's central parity rate.

"Mr Geithner's remarks have invariably had some impact on the current appreciation of the yuan." Nie remarked.

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