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SHANGHAI: The yuan ended at a fresh record high yesterday as the central bank continued to allow the currency to rise to help fight imported inflation, but onshore traders remained convinced it would not resort to any one-off revaluation despite rumours overseas.
The People's Bank of China (PBOC) has set repeated record highs for the yuan's daily midpoint over the last several weeks, engineering an accelerated rise against the dollar that means it has now gained nearly 5% since it was depegged last June.
Those recent gains, together with comments this week by PBOC adviser Xia Bin that he would not rule out another one-off revaluation, have sparked talk among forex traders, especially those offshore, that such a move could be imminent.
But a number of reasons argue against such a possibility.
Traders also point to the fact that the PBOC could allow a spurt in the yuan of 2% to 3% over the course of a few trading days if it wanted to, just by continuing to set its midpoint higher and allowing the currency to rise in daily trade, negating the need for any one-off move.
“There would be huge pressure for the government to explain if it conducted another one-off yuan revaluation of 2% or 3% a goal it can now easily reach via the market,” said a senior trader at a major Chinese state owned bank in Beijing.
“An even larger one-off yuan rise would surely create a huge political storm in a country where quite a large number of people still believe yuan appreciation is part of a Western conspiracy aimed to contain China's development.” - Reuters
SHANGHAI: The yuan ended at a fresh record high yesterday as the central bank continued to allow the currency to rise to help fight imported inflation, but onshore traders remained convinced it would not resort to any one-off revaluation despite rumours overseas.
The People's Bank of China (PBOC) has set repeated record highs for the yuan's daily midpoint over the last several weeks, engineering an accelerated rise against the dollar that means it has now gained nearly 5% since it was depegged last June.
Those recent gains, together with comments this week by PBOC adviser Xia Bin that he would not rule out another one-off revaluation, have sparked talk among forex traders, especially those offshore, that such a move could be imminent.
But a number of reasons argue against such a possibility.
A clerk holds up a bundle of 100 yuan notes at a bank in Beijing — AP
Policymakers as senior as Premier Wen Jiabao have repeatedly ruled out the possibility of another one-off revaluation, meaning any surprise would put the government's credibility at risk and could spark a backlash from the politically strong export sector.Traders also point to the fact that the PBOC could allow a spurt in the yuan of 2% to 3% over the course of a few trading days if it wanted to, just by continuing to set its midpoint higher and allowing the currency to rise in daily trade, negating the need for any one-off move.
“There would be huge pressure for the government to explain if it conducted another one-off yuan revaluation of 2% or 3% a goal it can now easily reach via the market,” said a senior trader at a major Chinese state owned bank in Beijing.
“An even larger one-off yuan rise would surely create a huge political storm in a country where quite a large number of people still believe yuan appreciation is part of a Western conspiracy aimed to contain China's development.” - Reuters
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