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BEIJING - China's central bank set the daily reference rate for the yuan against the dollar at a record high of 6.2891 on Friday, marking the first time the rate has fallen below 6.29 since China began to reform its system for setting exchange rates in 2005.
"The change conforms to our expectations as China strengthens its reform of the mechanism to set currency exchange rates and shows some compromises with external pressures," said Wang Tao, head of China economic research at UBS Securities Co Ltd.
Although the country has seen capital outflows since the fourth quarter last year, she predicted the yuan will appreciate by 2 to 3 percent in 2012.
Since the start of the year, the reference rate for the yuan's exchange rate against the dollar has only increased by 0.19 percent. In January, China's yuan depreciated by 0.17 percent.
Although the reference rate was set higher, the actual trading rate for the yuan against the greenback went down to 6.3062, showing that the demand for the yuan remains weak. The yuan is permitted to move as much as 0.5 percent either above or below the daily reference rate.
Some analysts said China's increasing short-term external debt will bring the country under greater pressure to sell off yuan.
The amount of China's outstanding short-term external debt stood at $500.9 billion by the end of 2011, up by 33 percent year-on-year, according to data released by the State Administration of Foreign Exchange on Thursday.
(For full story, please see March 24 China Daily page 9.)
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