The Chinese currency rose to a fresh high against
the US dollar Monday but analysts believe the appreciation is not unexpected.
The People's Bank of China, the central bank, set the central parity rate - a
benchmark set on the basis of weighted average prices given by market makers -
at 7.8402, breaching the 7.85 psychological barrier.
The value of the renminbi has risen by 5.31 per cent since July 21 last year,
when the government reformed the exchange rate system to allow the yuan to float
against the US dollar within a daily 0.3 per cent band from the official central
The exchange rate was set at about 8.27 per US dollar before the reform.
"Given the trend of the yuan's appreciation (in the past months), today's
rise has not surprised us," Wang Hong, a Shanghai-based analyst, said Monday.
The US currency has been falling globally, especially ahead of a speech to be
given today by Federal Reserve Chairman Ben Bernanke, which may further drive
down the value of the greenback, analysts said.
Moreover, the expected visits by Bernanke and Treasury Secretary Henry
Paulson to China also contributed to the upward movement of the renminbi. Many
market watchers believe they will press the Chinese Government to revalue the
yuan, which Washington says is undervalued.
Politics, however, is not the main factor behind the renminbi's appreciation.
"At a certain point, news about such visits may affect the instant movement of
the yuan," said Li Yongsen, researcher with Renmin University of China's
Financial and Securities Institute. "but they are only temporary."
The value of the yuan has been rising gradually under the pressure of China's
stockpile of foreign exchange reserves and huge trade surplus. The US dollar, on
the other hand, has weakened since many countries seem to be adjusting the US
dollar-centred international reserve structure.
Yi Xianrong, researcher with the Institute of Finance and Banking of the
Chinese Academy of Social Sciences, said: "The new high (in the yuan's central
parity rate) is not surprising, it is still within the (band) limit of 0.3 per
In the wake of last July's reform, the market's general expectation has been
that the renminbi would appreciate to about 7.8 yuan per US dollar by the end of
The Hong Kong dollar, which is pegged to the US currency, hit a new low
against the yuan yesterday, with their value almost equal.
"Since the Hong Kong dollar is virtually pegged to the US dollar, its
weakening against the renminbi is only a matter of course," said