CHINA / National

Yuan rate against dollar hit record high
Updated: 2006-04-07 07:42

The exchange rate of the Chinese yuan to the U.S. dollar reached a 12-year high to hit 8.0116 on Wednesday, according to Thursday's China Securities News.

The Chinese currency, also known as renminbi or RMB, chalked up its biggest ever weekly appreciation last week, up more than 3 percent since China's exchange rate reform last July when the value of the yuan started to be linked with a basket of currencies rather than being pegged to the U.S. dollar.

The yuan's recent appreciation shows the market welcomes the news that President Hu Jintao is to visit the United States and that China's foreign exchange reserves are now the biggest in the world, said Cao Honghui, a finance research fellow with the Chinese Academy of Social Sciences.

Hu will visit the United States this month, a trip "aimed at enhancing mutual trust and expanding common understanding", according to a Foreign Ministry spokesman.

Last July, China raised the value of the yuan by 2 percent and scrapped its decade-old peg to the U.S. dollar.

But the United States said the rise is too small. American manufacturers contend that the RMB was undervalued by as much as 40 percent, giving Chinese exporters an "unfair" price advantage and hurting the U.S. labor market.

U.S. pressure built up as China's trade surplus with the United States hit a new high in 2005. Statistics provided by China and the United States differ significantly. China said the Sino-U.S. trade hit 212 billion U.S. dollars last year.

China's foreign currency reserves are being boosted as the country buys dollars and other foreign currencies that come into the economy, amid booming foreign trade, and stockpiles them in U.S. Treasury bonds and other assets as means of foreign exchange controls and to guard against possible inflation, analysts say.

Central banker Zhou Xiaochuan said it is "not reliable" to achieve a Sino-U.S. trade balance only by adjusting exchange rates.

China will not have another one-off revaluation of yuan, said Premier Wen Jiabao last month.

But the yuan is allowed to move 0.3 percent up or down from the benchmark value against the dollar per day.