China's central bank ruled out any more abrupt ups and downs in the value
of its currency, the yuan, pouring cool water on further currency speculations.
A Chinese woman walks past a poster advertising a foreign
exchange business at a bank in Shanghai August 11, 2005. China's yuan
strengthened further to a new post-revaluation high versus the dollar on
Thursday, a day after the central bank revealed the foreign currencies in its
reference basket. [Reuters]
The yuan, also called Renminbi, on Monday climbed to its highest
level since its July 21 revaluation, as the comments by Ma Delun, a deputy
governor of the People's Bank of China, suggested Beijing banking authorities
will allow the yuan appreciate in the foreign exchange market in Shanghai.
"Right now we often hear corporates and all sorts of people asking when
is the next time the foreign exchange rate will be adjusted," Ma said.
"I'd like to tell everyone, the next change in the yuan exchange rate is
now happening everyday, every hour the changes are happening," Ma said in a
speech given over the weekend at a conference in the southern Chinese city of
Shenzhen.
The yuan rose to 8.0954 to the U.S. dollar on Monday, its
highest close since July 21, when the People¡¯s Bank of China revalued the
currency at 8.11 yuan to the U.S. Dollar, up about 2.1 percent from the previous
rate of 8.28 yuan. The July 21 revaluation also cut the yuan's decade-old peg to
the U.S. dollar, linking it instead to a basket of currencies of China's main
trading partners, including the U.S., Japan, the EU and South Korea.
Last week, the yuan had gained amid some market speculation that a state
visit to the United States by Chinese President Hu Jintao early September might
prompt another revaluation.
China's central bank is now implementing a
"managed floating system", in which the daily fluctuation ceiling and floor of
the yuan movement in the foreign exchange market should not exceed a 0.3 percent
of its opening level. Since the July 21 move, the yuan has gained 0.2 percent
against the dollar.
The central bank's goal is to maintain basic yuan
stability, Ma added.
Adjustments in China's foreign exchange policy will
give the market a much stronger sway over the yuan's value, though the movement
may at first be perceived as slow, the Financial Times quoted China's central
bank governor Zhou Xiaochuan as saying.
Though the yuan's movement might
seem small, "the important thing is that it has started to float and over time
market forces will play a more and more important role," Zhou said.
Zhou
said the central bank wants the yuan to move gradually to allow Chinese
companies to adapt to the new trading system and to become familiar with
financial instruments, such as forwards, used to hedge exchange rate risks.
The comments came as top finance officials from the so-called Group of
20 developing and industrialized nations prepared to meet Thursday in the
northeastern Chinese port city of Dalian. China this year assumed the presidency
of the G20, a group created in 1999 with the aim of reforming the global
financial system to make financial crises less likely.
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