Yuan hits record high against dollar

The yuan hit a record high versus the dollar on Wednesday as the People's Bank of China fixed another all-time high mid-point and a top government official reiterated that imported inflation remained strong.

The PBOC has let its yuan mid-point fixing hit a slew of record highs this year as the government fights persistently high inflation, partly driven by firm global commodity prices.

Now Xu Xianping, vice head of the National Development and Reform Commission, China's top economic planner, told a regular briefing on Wednesday that the country still faced elevated inflationary pressures, partly due to higher prices of imported goods.

Local media reported on Wednesday that China's consumer price index (CPI) could hit a multi-year high of 5.5 per cent in May, underlining the necessity for the government to continue its monetary tightening stance in place since last October.

"Evidence is clear that the yuan won't stop its appreciation against the dollar any time soon," said a dealer at an Asian bank in Shanghai.

Spot yuan was trading at a record high of 6.4766 versus the dollar in late morning trade, up from Tuesday's close of 6.4810 and toppling the previous all-time peak of 6.4777 touched one week ago.

The Chinese currency has now appreciated 5.40 per cent since it was depegged from the dollar in June 2010, and 1.75 per cent since the start of this year.

Before trade began, the PBOC set the yuan's daily mid-point at a record high of 6.4795 against the dollar, stronger than Tuesday's 6.4816. It uses the mid-point to guide the currency.

Dealers said they retained the forecast for the yuan to appreciate 5 to 6 per cent against the dollar for all 2011.

Offshore, one-year non-deliverable forwards (NDFs) were bid at 6.3640 in late morning, up from Tuesday's close of 6.3530. Their implied yuan appreciation in a year's time eased to 1.81 per cent from 1.99 per cent.

source : http://www.financialexpress.com/news/yuan-hits-record-high-against-dollar/800890/0


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