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  • Updated: 4:10pm


The Chinese yuan, also known as the renminbi, is already convertible under the current account - the broadest measure of trade in goods and services. However, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing because of worries about abrupt capital flows.


Yuan reaches record high against the US dollar

Further appreciation predicted, which would fuel inflation on the mainland and in Hong Kong

PUBLISHED : Saturday, 13 April, 2013, 12:00am
UPDATED : Saturday, 13 April, 2013, 6:22am

The yuan reached a record high yesterday as the central bank fixed its midpoint against the US dollar at the strongest level ever.

That sparked anticipation of further appreciation this year and stoked inflationary pressure on the mainland and Hong Kong.

The People's Bank of China set the midpoint at 6.2506 yuan per US dollar - up from the fixing of 6.2578 on Thursday - ahead of a visit by US Secretary of State John Kerry to Asia. The yuan jumped to 79.775 Hong Kong dollars per 100 yuan, just near the record of 79.729 on Wednesday.

China often allows the yuan to appreciate faster before visits by officials from Western countries, who usually push for exchange rate liberalisation.

However, the yuan is set to strengthen this year. Inflows of capital are expected to generate higher demand for the yuan than last year as the mainland economy recovers, economists said.

"In 2013 we'll see greater risks of capital inflows to China, rather than two-way movements in the yuan exchange rate or capital outflows as last year," said Chang Jian, an economist at Barclays Capital. Barclays expects the yuan to strengthen 2 per cent against the greenback this year, after considering China's intention to protect exporters in the still shaky economic recovery.

The yuan rate in the spot market touched 6.1903 per dollar yesterday, the highest since 1994. The yuan spot rate has risen 0.6 per cent so far this year, after hitting highs in the past couple of weeks.

Economists at Standard Chartered forecast the spot rate for yuan would reach 6.18 by the end of June and 6.10 by the end of this year. They said China was unlikely to follow Japan in depreciating its currency, as Japanese exporters are not its major competitors.

Nathan Chow, a DBS Bank economist, expects the strengthening of the yuan to continue to put pressure on inflation in Hong Kong because the city's currency is pegged to the US dollar.

"The inflationary pressure caused by the yuan appreciation is inevitable, as Hong Kong imports a variety of goods, such as food and medical supplies, from the mainland," Chow said.

A 1 per cent rise in the yuan would result in a 0.05 percentage point increase in Hong Kong's consumer inflation, the Monetary Authority says.


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Bernanke and Obama have done their jobs well.
Butch Blosc
Comrade Obama is doing a great job for the Party. He is killing the American dollar, just as his handlers and his grandparents hoped he would do.
Sherman McCall
This headline is wildly wrong. The Yuan was as strong as 1.5 to USD in 1980.
Its dramatic devaluation in the 1990s is fundamental to China's trade surplus.
See historical exchange rates here.
China's FX reserves represents their future inflation.
Meanwhile back in the California, Jerry Brown has decided to travel to China and ask THEM to invest in his liberal "light-high-speed-rail" debacle. NEWSFLASH: Jerry...China has money because they don't don't pour it into pork projects and social-entitlement programs. TAKE A HINT!!!
California is broke because the HAD money, but state and federal taxes and regulations, complicated by socialized-mass-illigal-immigration programs has decimated their revenues, chased companies and wealth-producing people from the state and saddled the taxpayers with unsurmountable debt. What would lead you to believe that the Chinese can't see this? Just because the CALIFORNIA LEGISLATURE can't see it is proof that the problem is with YOU! Wake Up you dumb butt.
No wonder Walmart and others raised price on their made in china ****.
Jon Stimpson
Well gee, that was unexpected; a newly capitalistic Chinese economy is surpassing a newly communistic US economy?
Who would have thought?
We have witnessed the transition of a moderate/right US into a left/far left country. We will not prevail.
Say goodby to the country that you loved so much before it was taken over by the Communists.
In 2001 the dollar had to plummet in value so we could stay afloat. Print more, they are worth less and the debt can be managed. The people suffer when they spend more and get half as much. Obama has done several things I blame him for the current economic mess we are in for the last four years. But economic devaluation means greater exports, somewhat more jobs and less value to the dollars owed our creditors. China is going through a housing bubble that could sink their fictional growth rate. 600 million people in China live on $6.00 a day. The poorest in the USA live mighty good.
I wonder if converting USD into the Yuan will become a viable alternative for those that can't afford gold at its current price. I do have a few thousand sitting in my closet that I would like to protect against the coming devaluation of the USD within 2-3 years.
The have been grooming him for it for 20 years.
I believe Komrade Bush the younger was also pushing for this (unsuccessfully) for many years before he retired into self imposed exile.


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