Posted on 05/16/2006 8:05:16 PM PDT by familyop
CHINA’S willingness to allow the yuan to rise above the key eight to the dollar level marks no real change in its gradualist currency policy, disappointing those wanting faster and sharper gains, analysts said yesterday.
Beijing has long resisted pressure, mainly from the United States, to let market forces determine the value of the yuan, saying that to do so would pose unacceptable risks for its financial system at this stage of reform.
Nothing suggests that position has now changed. Perhaps significantly, the yuan's central parity rate was set at 8.0150 to the dollar early yesterday, down from the 7.9982 which attracted so much attention on Monday.
The yuan closed at 8.0070 on the day.
“I think the eight dollar level is obviously important psychologically, but I don’t expect a significant change in terms of the government’s policy,” said Tai Hui, economist at Standard Chartered in Hong Kong.
In July last year, Beijing revalued the yuan by 2.1% to 8.11 to the dollar and ended its pegged currency system, a step which at the time was hoped would result in a more flexible exchange rate policy.
Instead, it kept the yuan on a miserly leash, allowing further appreciation of just 1.3% since despite increasing calls for more from the United States and other partners struggling with huge trade deficits with China.
Washington argues that Beijing keeps the yuan deliberately undervalued in order to gain an unfair trade advantage which resulted, according to US figures, in a US$202bil (RM727.2bil) trade deficit with China last year. – AFP
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