The yuan has risen past the Hong
Kong dollar for the first time in 13 years, underlining the mainland's
economic ascent and fueling debate over whether to scrap the special
administrative region's exchange rate link to the US dollar.
climbed to 1.0002 per Hong Kong dollar and advanced 0.16 percent to 7.7950 to
the US currency at 4 pm in Shanghai, the biggest gain in six weeks, according to data
compiled by Bloomberg.
Gains in the yuan may add to pressure on Hong
Kong to adjust a 23-year-old currency peg to the US dollar to reflect growing
economic ties with the mainland. The Hong Kong Monetary Authority (HKMA) says
any change would rock investor confidence and has spent the past three years
stopping currency appreciation.
"Breaking 7.8 is psychologically
impressive, but it's just a passing point," said C. H. Kwan, a Tokyo-based
senior fellow at Nomura Institute of Capital Markets Research, a unit of Japan's
biggest brokerage. "The Hong Kong dollar is likely to remain pegged to the US
dollar at a central rate of 7.8 in coming years."
As the HKMA held the
Hong Kong dollar steady, the yuan, or renminbi, has advanced 5.8 percent since a decade-long US
dollar link of 8.3 was scrapped in July 2005.
HKMA Chief Joseph Yam, who
wasn't immediately available for comment yesterday, said on August 25 that the
yuan reaching 7.8 was a "psychological level" that wouldn't play a role in
setting Hong Kong's currency policy.
"The Hong Kong dollar market has
remained stable after the renminbi exchange rate breached the 7.8 level," said
an HKMA spokesman, who asked not to be identified. "The government has no
intention to change the linked exchange rate system, which continues to serve
Hong Kong well."
China's trade surplus swelled 74 percent to a record
$177.5 billion last year as exports surged. US Treasury Secretary Henry Paulson
and Federal Reserve Chairman Ben S. Bernanke, visiting Beijing last month, urged China to relax controls on its
currency to ease the imbalance.
"This reinforces the story that China's
still got huge surpluses and needs to deal with them," said Thio Chin Loo,
senior currency strategist at BNP Paribas SA in Singapore. "The pressure for
more gains isn't going to go away."
The mainland's stock market
surpassed $1 trillion in value after major benchmarks more than doubled last
year, making it the world's 10th-largest equity market, Bloomberg data show.
Hong Kong's market value is $2.1 trillion.
The mainland will let
companies sell yuan-denominated bonds in Hong Kong, the People's Bank of China
said late on Wednesday, in a move aimed at increasing the use of the
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