Yuan rises to 17-year high against the greenback

Updated: 2011-08-11 09:43

By Wei Tian (China Daily)

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Yuan rises to 17-year high against the greenback

The yuan's value against the dollar rose to a 17-year high amid a global stock market rebound. [Photo / China Daily]

BEIJING - The exchange rate of the yuan against the dollar rose to a 17-year high after the US Federal Reserve Board announced it will maintain interest rates at a record low and amid a global stock market rebound.

However, imported inflation pressures should be closely monitored, officials and economists said.

According to the People's Bank of China, the rate of the yuan against the dollar was 6.4167, 0.26 percent higher than the previous day, which was the biggest rise in nine months.

Global stock markets showed strong performances on Wednesday for the first time since Standard & Poor's downgraded the US' credit rating and provoked panic among investors of a potential second financial crisis. China's A-share market in Shanghai rose 0.92 percent while Shenzhen was up 1.19 percent.

The US Federal Reserve Board announced on Tuesday it will maintain low interest rates until mid 2013.

Following the announcement, which lifted stock markets worldwide, economists had expressed concern that low interest rates in the United States would exert more pressure on China's efforts to contain inflation, a key economic priority for the world's second-largest economy.

The National Development and Reform Commission said in a statement that it is very likely that the US will launch a third round of its quantitative easing policy to repay its debts and boost the economy.

However, it may bring more "hot money" into emerging economies, such as China, which will make it more difficult for the country to tame rising consumer prices.

China's inflation stood at 6.5 percent in July, the highest in 37 months.

An official with the China Securities Regulatory Commission, who declined to be named, said as the US Congress is trying to reach a deficit-cutting plan before the end of this year, many uncertainties remains and these will be challenging to other economies.

China's Vice-Premier Wang Qishan and the US Treasury Secretary Timothy Geithner on Tuesday exchanged opinions on the global economy and the state of the financial markets during a telephone call, a news release on the official website of the Chinese government said.

The call was made just hours before Premier Wen Jiabao urged "relevant countries" to implement responsible monetary and fiscal policies and reduce their deficits.

In a recent internal conference of the Chinese central bank, its governor Zhou Xiaochuan reiterated a "prudent" monetary policy in the second half of the year, making price stabilization a top priority on the government's "to-do" list.

Lu Zhengwei, chief economist with Industrial Securities Co Ltd, said that with external uncertainties, the Chinese government should take a "wait-and-see" attitude and should not raise interest rates unless the global markets become stable.

Guo Tianyong and Tang Wen with Renmin University of China, believed that although inflation will peak soon, one or two interest rates hikes are still needed this year.