The yuan at its highest in five years
June 21, 2010
Reaction imediata. On Saturday, the People's Bank of China, the central bank of China announced it had decided to continue the reform of the mechanism of RMB exchange rate, in order to "enhance flexibility." Two days later, the renminbi, another name for the currency, displays a record on the interbank market at 6.8089 against the dollar, reports the agency Dow Jones Newswire.
This is its highest level since the revaluation of some 2.1% against the dollar of 21 July 2005 which saw the yuan's exchange rate rise from 8.28 yuan to 8.11 against the dollar. Two years ago, China has fixed its currency to the greenback at about 6.8 yuan against the dollar, after three years of steady appreciation.
On Monday, the Central Bank of China has set a Monday morning during pivotal 6.8275 against the dollar, unchanged from Friday.But every day, arbitrage currency may fluctuate plus or minus 0.5% of the pivot.
Good for Global Trade
According to Wang Tao, an economist at UBS, "it is possible to arrive quickly enough to an appreciation (the yuan) 3 or 4% in the coming weeks." Mark Williams of Capital Economics expects more modest gains: of the order of 2% vis-à-vis the dollar by the end of the year.
A rising yuan would also give China greater purchasing power, which would be positive for world trade and especially for commodity exporters such as Australia, Brazil, Canada and New Zealand.China is the second largest oil consumer behind the United States and the largest consumer of iron ore, copper and aluminum.
In trading, the index rose on average by 2%, according to the S & P Asia 50 Index, which comprises the largest market capitalizations in the region.
In China, the Shanghai Stock Exchange recorded an increase of over 2% on Monday morning. In Hong Kong, the Hang Seng wins 2.6% to 20,806 points. "The airlines, real estate or in metals are the most direct beneficiary of yuan appreciation," said Shen Jun, an analyst at Bank of China International. In Japan, the Nikkei 225 wins 2.07% to 10,201 points by 6:45, while the Topix rose 1.87% to 901 points. In Australia, the rise of the S & P/1SX 200 reached 1.22%, 4607 points.
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