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Yuan’s record gain against dollar
China’s
yuan has jumped against the dollar in its biggest post-revaluation
daily rise after the central bank signalled a shift in its policy.The
yuan gained 0.37%, closing at 7.3175 to the dollar.The Chinese central
bank encouraged the jump by setting a very strong daily reference rate
or mid-point of 7.3079.”The extraordinarily strong mid-points seen this
week are a clear signal of faster appreciation of the yuan in the
coming year,” said a bank trader.Strong reference rates
In
July 2005, China freed the yuan from its tight peg to the US dollar, by
allowing it to float within a narrow 0.15% band either side of a level
set by a basket of currencies.The central bank’s reference rate defines
the day’s trading band, which now extends 0.5% on either side of the
rate.On Monday, the central banks set such a high mid-point that the
previous trading day’s close was outside the trading band.The central
bank has been setting the strong reference rates despite the dollar’s
recent rise in markets around the world.Further moves
In
November, the central bank said it would use the exchange rate to fight
inflation, as prices have risen to an 11-year high.One Chinese trader
said he thought the central bank might make “some big moves soon,
possibly even a further widening of the yuan’s daily trading band”.At
the same time, China’s main stock index rose 1.44% on Thursday, driven
by property and bank shares.Traders say that some investors were buying
property stocks partly because of the accelerating appreciation of the
yuan against the dollar, which boosts asset values.
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