The yuan yesterday rose to a year-high against the US dollar for the fifth consecutive day, and is expected to strengthen further towards the end of the year, defying earlier expectations by analysts. It hit an intra-day high of 8.302 to the dollar on the Shanghai interbank foreign exchange market, before closing at 8.3026, against Thursday's 8.3036 close. The surge has prompted at least one China economist to raise his forecast for the yuan to reach 8.29 to the dollar by year-end. Charles Li, a senior economist at NatWest Markets, said the yuan could reach 8.28 in the first quarter of next year. Earlier this year, many China economists had expected the yuan to depreciate due to falling exports. Their view was further supported by the two recent cuts in interest rates and the relaxation of monetary policies, with most of them putting the yuan at 8.50 to the dollar by year-end. Mr Li, who earlier met senior Chinese foreign exchange officials in Beijing, said the central government seemed determined to let the market dictate the yuan exchange rates. On the market, US dollar supply is much higher than demand. One factor helping to buoy the yuan was China's soaring foreign exchange reserves, which are expected to reach US$100 billion this year. An improving foreign trade balance also boosted the currency. Economists said the reversal of falling exports and Beijing's recent decision to step up tax rebates to exporters had pacified calls for devaluation of the yuan. The director of the State Administration of Exchange Control, Zhou Xiaochuan , in Hong Kong last month said the authorities believed the yuan was under pressure to appreciate.
