IN a reversal of the trend since last July, hard currencies are again fetching more on the black market than the official rate. Black market dealers in Beijing said demand for US and Hong Kong dollars had strengthened considerably since the beginning of the year as local enterprises and mainland Chinese bought more of the hard currencies. In Xiushiu Jie, a lane of crammed, tiny silk stalls in central Beijing which is a favourite haunt of tourists, the US dollar could command at least 8.75 yuan, against the official rate of 8.7. Foreigners selling more US dollars can bargain for an even higher rate of 8.8 yuan. The Hong Kong dollar, the second most popular foreign currency after the US dollar, is worth about 1.15 to 1.25 yuan, compared with the swap rate of 1.126. ''People are buying up more foreign currencies, especially the US dollar, because they are afraid that the yuan will devalue further in future,'' said Li Jun, a black market dealer who was offering 1.25 yuan to the Hong Kong dollar because he needed foreign currency desperately. He said the hard currencies were also a good hedge against inflation, which was hovering at 20 per cent in the major cities. ''We still prefer foreign currencies because they don't go down as much in value as the yuan,'' said Jiang Julin, an antiques dealer who was asking for US dollars when selling high-ticket pieces. In the first two weeks of trading since the country adopted the unified managed exchange rate system from January 1, the US dollar had been trading within narrow margins around 8.7 yuan. The yuan was effectively devalued by about 50 per cent when the People's Bank of China (PBOC), the central bank, announced the abolition of the official rate of 5.8 yuan to the dollar. Some analysts said this rate was artificially supported by the PBOC and added that a devaluation later in the year was highly possible. ''There is a lot of speculation in the foreign community on where the yuan is going,'' said Johnny Chen, the American Chamber of Commerce's treasurer in Beijing. ''The conservative opinion is that it will fall to about nine to 10 yuan to the dollar and the daring say it could go down to 12 to the dollar.'' The yuan fell to its lowest of nearly 12 to the US dollar last June before the country's economic supremo Zhu Rongji took over the People's Bank of China and stepped in to support the yuan at about 8.7. Since then, the yuan has stayed at about that level. Many Chinese believed the central authorities would always step in to support the currency, so the rush to buy foreign currencies was tempered, bringing the black market rates to below the swap rates. But the effective devaluation prompted many to hoard foreign currencies, despite an official move to ban their circulation outside of designated financial institutions.