RMB breaks 7.85 mark against US dollar

Updated: 2006-11-27 13:53
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The value of the Renminbi (RMB) against the US dollar hit a new high on Monday, with the central parity rate at 7.8402 yuan to one dollar, breaking the 7.85 mark.

This signifies that RMB value has risen by 5.31 percent since July 21, 2005, when the Chinese government launched the reform of the exchange rate system to allow the yuan to float against the U.S. dollar within a daily 0.3 percent band from the official central parity rate.

The appreciation followed previous records on November 9 when the central parity rate hit 7.8697, breaking the 7.87 mark, and November 23 when it was 7.8596, breaking the 7.86 mark.

The exchange rate was set at about 8.27 yuan per US dollar before the reform.

The yuan's appreciation is attributed to the continuous slump of the US dollar and expectation for an interest rate drop in the United States, said analysts.

China's soaring foreign exchange reserves and the rocketing trade surplus are also considered important factors that pushed the yuan's value to new highs.

China's foreign exchange reserves are expected to reach one trillion US dollars after climbing to 987.9 billion US dollars by the end of September, with a monthly average increase of 18.7 billion US dollars for the first nine months.

US critics have argued that China's currency is undervalued by as much as 40 percent, giving Chinese goods price advantages and resulting in a mounting trade deficit for the United States, which has exacerbated the pressure to appreciate the yuan.

However, Tang Xu, director general of the research department of China's central bank, said the current floating band of the yuan's exchange rate is wide enough.