Chinese yuan hits fresh high to U.S. dollar

By Kim Young-gyo
HONG KONG, Jan. 12 (Yonhap) -- The Chinese yuan continued its upward move on
Wednesday to the highest level against the U.S. dollar, as Beijing is seen to
allow its currency to appreciate in a bid to curb inflationary pressure.
According to the central People's Bank of China, the yuan's central parity rate
was set at 6.6128 against the greenback, the highest since July 21, 2005, when
China abandoned a decade-old peg against the greenback and shifted to a managed
floating exchange rate.
It was 88 basis points lower than Tuesday's 6.6216, which was the strongest
against the dollar at that time.
In 2008, however, the global financial crisis put a halt to China's foreign
exchange rate reform. The Chinese central bank adopted a pegging policy of the
yuan to the U.S. dollar once again. During the financial crisis, the yuan had
been pegged at around 6.83 to the U.S. dollar.
Many market watchers expect that China will allow a small, gradual appreciation
in the yuan, as it will help reduce the worst inflation pressure the country is
currently facing.
The appreciation is also seen as the Chinese government's response to U.S.
President Barack Obama, who has repeatedly called on China to allow the yuan to
find a fair market value. Chinese President Hu Jintao is scheduled to make a
visit to Washington on Jan. 19.
The U.S. has been arguing that China artificially lowers the value of the yuan,
giving its exporters an unfair advantage in overseas markets. China has
continuously resisted such arguments.
ygkim@yna.co.kr
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