China's yuan climbed as high as 8.1030 and finally closed at
8.1032 to the US dollar on Tuesday, recording a post-revaluation
high for the fourth straight session as dealers gained confidence
that the central bank would allow small gains, Reuters
reported.
The previous day's closing rate was 8.1046 yuan to the
dollar.
Dealers said the dollar's weakness against the euro and the yen
was the primary reason for the yuan's rise on Tuesday.
The People's Bank of
China, China's central bank, has been giving the currency room
to rise by small increments. Dealers said this has given the market
some confidence that Beijing would not step in to curtail a gradual
appreciation of the currency, which was revalued on July 21.
"Although very tiny, gains over past days have amounted to a
further appreciation, indicating the central bank is giving the
market larger leeway to trade the yuan," according to the Reuters
report quoting a dealer from a foreign bank..
"And that will benefit China a lot; relieving international
pressure for further revaluations and preparing its banks and
companies for the impact of an increasingly flexible forex regime,"
the report said.
But others remain wary of pushing the currency too far too
fast.
"The yuan's strength today was more or less in line with the
dollar's weakening on global markets," said a Shanghai-based dealer
at Bank
of China, the country's top foreign exchange bank.
Although China's central bank says the yuan is tracking a basket
of currencies, most dealers think that basket is mostly full of
dollars, according to the report.
"We believe the dollar still accounts for the lion's share in a
package of currencies the yuan is now linked to, so the domestic
market is mainly following dollar movements," said a dealer at a
foreign bank.
The initial revaluation to 8.11 per dollar from a long-standing
trading mid-point of 8.2780 amounted to a 2.07 percent increase in
value. After more than a week of micro moves, mostly upward, the
gain has been extended to 2.16 percent.
The daily range remains narrow because traders fear that buying
the yuan at high prices might prompt official selling that would
drive the thinly traded currency lower again, Reuters reported.
(China Daily August 4, 2005)