(chinadaily.com.cn)
Updated: 2007-10-25 15:00

The yuan's central parity rate opened Thursday morning at 7.4867 to the US dollar after breaking the 7.50 mark yesterday, according to the Chinese Foreign Exchange Trading System.

The Renminbi climbed to 7.4841 per dollar as of 1 pm Thursday.

Ye Yaoting, a foreign exchange analyst with the Bank of Communications believes the yuan will continue its upward momentum for the long term as the country's trade surplus is widening.

He believes the yuan will hit the 7.4 mark in the next two months.

The National Development and Reform Commission (NDRC) estimates China's trade surplus will be $250 to $300 billion this year from $177.5 billion in 2006. As a result, the swelling surplus is putting more pressure on a faster appreciation of the Renminbi.

The continuing weakness of the US dollar is another factor behind the faster yuan appreciation, experts say. The US is believed to have abandoned its "strong dollar policy" this year after Hank Paulson became the new Treasury Secretary. In addition, the recent subprime woes hurt the greenback, leading to lagging confidence in the currency.

Some EU countries have also complained about the slow pace in the yuan's appreciation.

Accelerating the appreciation of the yuan is a double-edge sword for economy, according to an analyst with the Securities Times. It can moderate the surplus, offset the liquidity, as well as optimize foreign trade. However, it may also attract more hot money and artificially set high asset and property prices.

The Chinese currency has appreciated 8.22 percent from the central parity rate of 8.11 set in July 2005 when the central bank ended the yuan-dollar peg.