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Fed moves may be just 'symbolic'
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Liu said the US dollar won't recover until the Fed cuts the interest rate to an "appropriate" level.

As the US dollar dives, the yuan is expected to appreciate further. The domestic benchmark interest rate is now higher than the US rate, which may bring more speculative capital into the country.

China's CPI, the key inflation gauge, surged to an 11-year high of 8.7 percent last month. An interest rate rise is expected soon as a way to combat inflation.

"While it's necessary to raise the interest rate, it is more advisable for the country to combine policies such as strengthening forex management to ease its liquidity-induced problems," Wang said.

The authorities are rumored to be considering a high-margin, one-time revaluation after the 11th National People's Congress concludes this week. The People's Bank of China refused to comment.

"A drastic one-time revaluation would be a blow to export-oriented manufacturers and exporters," Liu said. But as the current pace of yuan appreciation is "impressive" - 10 percent annually, based on currency futures - the move is unnecessary, he said.

(China Daily March 18, 2008)

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