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Yuan hits new high against US dollar
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China's currency, the yuan, climbed 77 basis points to a central parity of 7.1846 yuan to one U.S. dollar on Tuesday, setting a new high on the 10th occasion since the beginning of this year.

The local currency had refreshed record for four trading days in a row in mid January. Last Thursday it broke the 7.19 mark to a central parity of 7.1853 yuan to one dollar, following a bold half-percentage point rate cut by the U.S. Federal Reserve.

Analysts attributed the continuous rise to a weakening U.S. dollar. They said the declined rate for U.S. retail sales in December was much higher than expected, which was ascribable to the lackluster of the country's real estate market and price hikes for oil.

The release of the figure helped push the U.S. dollar further down, which had ebbed continuously for a while. The downturn of the U.S. dollar would continue throughout the first half of 2008, while Asian currencies were expected to remain strong.

They forecast that the Chinese currency would appreciate at least 7-10 percent against the U.S. dollar for the whole year.

The Chinese currency had appreciated against the greenback by about 12 percent since a new currency regime was imposed in July 2005 to revalue and de-peg it from the dollar.

It had climbed 6.9 percent against the dollar in the past year, but some U.S. critics say it remains undervalued, giving Chinese exporters an unfair advantage and resulting in the massive trade imbalance between the two countries.

China was not against revaluation of the yuan, but opposed "excessively rapid" appreciation that was inappropriate to its national conditions, Commerce Minister Chen Deming said last month.

Premier Wen Jiabao also said China would improve the yuan's exchange rate mechanism in a controllable and gradual manner, let the market play a bigger role in the mechanism and enhance the currency's flexibility.

On Tuesday, the last trading day on the Chinese lunar calendar, the yuan lost 11 basis points against the unified European currency to 10.6497 yuan to one euro. It gained 41 basis points against the Japanese currency to 6.7309 yuan to 100 Japanese yen while lost 365 basis points to reach 14.1820 yuan to one British pound.
(Xinhua News Agency February 5, 2008)

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