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China's yuan sets another mark
Updated: 2005-08-02 07:26

China's yuan closed at a post-revaluation high against the dollar for a third straight session Monday, with many dealers seeing increasing leeway to allow the currency to gain but some economists saying it was too early to tell, the Reuters reported.

A bank teller counts dollars at a branch of Bank of China in Shanghai, August 1, 2005. [newsphoto]
The central bank remained absent throughout, traders said, as the currency closed at 8.1046 to the dollar, up from Friday's rate of 8.1056 and showing a 0.07 percent appreciation since July 21, when Beijing revalued the yuan by 2.1 percent to 8.11 per dollar.

Dealers say the People's Bank of China (PBOC) has been keen to give the impression that market forces are at work, by allowing creeping gains against the greenback, the Reuters report said.

The daily ranges remain narrow, not because the central bank is directly controlling the market but because traders, operating in uncharted waters, fear buying the yuan at high prices that might prompt official selling, driving the thinly traded currency lower again.

"This is a regime shift. You're going into the unknown. This is not only true for the traders but also the PBOC," said JPMorgan currency analyst Claudio Piron.

"The PBOC is still feeling its way around, trying to gauge the market. Given that we conceptually have a crawling peg, although that is currently non-existent, it's probably not trying to make the yuan wholeheartedly fixed."
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